NHB to introduce guidelines for non-banking housing finance cos

The National Housing Bank (NHB) will soon come out with guidelines for non-banking housing finance companies to give impetus to funding for housing sector and create an asset-backed securitisation thereby further expanding the securitisation domain, R.V. Verma, chairman, NHB said at an ASSOCHAM event held in New Delhi today.

“Investments in the housing sector account for a meagre seven per cent of the country’s gross domestic product (GDP), which is woefully low and inadequate more so as the sector is second largest employer after agriculture,” said Verma while addressing a national conference on ‘Securitisation: The Emerging Funding Vehicle’ organised by The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

“We have to find ways to bring more liquidity into the capital-deficient housing sector through market oriented measures and all this is satisfied by securitisation,” said Verma, adding, “Introduction of Basel III would bring in severe liquidity crunch and the banking sector would require huge amounts of capital inclusion and at the same time growth will continue to be more predominant, securitisation is thus a very imminent mechanism on both these fronts.”

The NHB chairman further said that securitisation would result in capital conservation, capital relief and optimum utilisation of capital through off-balance sheet transactions.

“Besides, the lending sector cannot lend beyond a certain point due to capital constraints and with securitisation they would be enabled to continue to lend and can come over all constraints if they are able to securitise,” said Verma while releasing an ASSOCHAM study titled ‘Securitisation: The Emerging Funding Vehicle’ along with A.K. Choudhary, general manager, Department of Banking Operations and Development (DBOD), Reserve Bank of India; S.C. Aggarwal, chairman, ASSOCHAM Capital Market Committee;  B.K. Sabharwal, chairman, ASSOCHAM Commodity Futures Market Committee and D.S. Rawat, secretary general.

 “Looking at the securitisation process from the housing sector’s perspective it is driven by need-driven funding, need-driven liquidity, need-driven capital inflows and all this resulting in greater transparency, stability and sustainability and for this each player is required to be aware of his role,” said Verma.

Verma also said that NHB is looking to mobilise funds from institutional investors to channelize long-term funds in the mortgage market for a better match of assets and liabilities which would be another benefit they seek to offer to the industry.

“Benefit of securitisation cannot be undermined in India’s perspective, however, the need of the hour is to make an effort to develop orderly and healthy securitisation and ensuring greater alignment of market in the interest of investors,” said Choudhary in his inaugural address.