All you need to know about the National Housing Bank (NHB)

[ecis2016.org] The National Housing Bank (NHB) was established to provide support to housing finance institutions in India

With an aim to address the non-availability of long-term finance to individual households that impeded the progress of the housing sector in India, the central government, in the Union Budget for 1987-88, announced that it would establish the National Housing Bank (NHB) as an apex institution for housing finance.

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When was National Housing Bank set up?

Following the move, the NHB was set up on July 9, 1988, under the National Housing Bank Act, 1987, to regulate and develop the housing finance sector in India.

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What is the function of NHB?

According to the National Housing Bank Act, 1987, the key objective of the institution is to operate as the primary agency to promote housing finance institutions, both, at the regional and local levels and to provide financial and other support to such housing finance institutions.

With its motto to ‘harness and promote the market potentials to serve the housing needs of all segments, with focus on low and moderate-income housing’, the New Delhi-headquartered NHB, which was notified as a public financial institution in 1991, also has regional offices in Bengaluru, Mumbai, Hyderabad and Kolkata.

As a mega financier for the housing sector, the NHB extends financial support to a large set of lending institutions through refinance and direct finance.

Refinance is extended to primary lending institutions (PLIs) with respect to eligible housing loans that are extended by the PLIs to individual borrowers. The refinance that is provided under various schemes, cater to all segments of the population in both, rural and urban areas. PLIs include housing finance companies (HFCs), scheduled state cooperative banks, scheduled urban cooperative banks, scheduled commercial banks, regional rural banks, small finance banks, agriculture and rural development banks (ARDBs) and apex cooperative housing finance societies (ACHFs). Refinance is also provided for project loans extended by HFCs to various implementing agencies.

Apart from this, the NHB also provides direct finance to public housing agencies, such as state-level housing boards and area development authorities, for large-scale integrated housing projects and slum redevelopment projects. It also participates in the equity share capital of HFCs and other related companies.

The NHB, which is handling the centre’s ambitious Pradhan Mantri Awas Yojana, also plays a promotional role for the government. In 2020, the NHB provided a subsidy of Rs 7,572 crores, benefitting 3,31,924 households under the PMAY-CLSS. It has provided a cumulative disbursement of Rs 21,633 crores benefitting 9,55,288 households. Under the affordable housing funds scheme, the NHB also allocated Rs 10,000 crore for FY21.

The NHB also publishes reports and research papers pertaining to housing sector trends and developments in the country, from time to time.

Who regulates NHB?

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The NHB acted as the housing finance regulator in India till 2019. However, banking regulator Reserve Bank of India (RBI) took over the powers to regulate HFCs from the NHB in August 2019, following a crisis caused by funds mismanagement in various non-banking housing finance companies, including the crises at IL&FS and DHFL.

Before the government decided to take away the powers of the NHB to regulate HFCs and handed those to the RBI in April 2019, the former was part of the RBI. After the move, the government took over the NHB.

“The NHB, besides being the refinancer and lender, is also the regulator of the housing finance sector. This gives a somewhat conflicting and difficult mandate to the NHB. I am proposing to return the regulation authority over the housing finance sector, from the NHB to the RBI,” finance minister Nirmala Sitharaman said in her budget speech in 2019.

The RBI, among other things, also provided a formal definition of ‘housing finance’, something that was missing in the NHB regulations. According to the RBI, housing finance would now mean financing, for purchase/ construction/ reconstruction/ renovation/ repairs of residential dwelling unit and all other loans, including those given for furnishing dwelling units and loans given against mortgage of property for any purpose other than construction/ buying of a new dwelling unit or renovation of an existing dwelling unit.

As the new HFC regulator, the RBI also introduced its own set of strict norms, to make HFCs more accountable.

NHB’s powers after 2019

Currently, there are 97 registered housing finance companies in India. In its revised role, the NHB continues to hold the power to inspect and penalise HFCs, in the capacity of their supervisor.

In December 2020, for example, it imposed a fine of Rs 47,000 along with 18% GST on GIC Housing Finance for violation of guidelines. It directed the company to pay the amount, within 10 days of receipt of the letter, dated December 28, 2020.

The NHB also continues to provide refinancing for HFCs and also come up with its housing price index. It also acts as a leader, by promoting new finance products in the Indian housing market such as reverse mortgage.

What is NHB RESIDEX?

In July 2007, the institution launched NHB RESIDEX, India’s first official residential housing price index, to evaluate property prices in 26 cities. However, ‘with a view to reflect the current macroeconomic scenario, the NHB RESIDEX was revamped to include a cluster of indices with updated base year, revised methodology and automated processes’. In 2015, thus, the index was discontinued and re-introduced in 2017 with updates in evaluation strategies and with a new base year of 2012-13 as against 2007, to map prices.

The housing price indices have been computed on a quarterly basis, starting from the quarter April-June 2013 and updated up to quarter January-March 2018, taking FY 2012-13 as the base year. From April-June 2018, the base year has been shifted to FY 2017-18.

Currently, the NHB RESIDEX covers price trends in 50 housing markets and there are plans to expand this number to 100 markets in the future. The index, which is designed to track changes in housing prices at the neighbourhood, city and national-levels, provides developers with a standardised tool to gauge housing demand in cities and across India. For home buyers, it enables them to check and compare prices, before entering into any property transaction.

The NHB RESIDEX comes up with quarterly updates for under-construction housing prices in 50 cities, based on two housing price indices (HPI) – at assessment prices and at market prices. Prices of under-construction property are captured in the market HPI while numbers reported by banks are collated into the assessment HPI.

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Prices for under-construction units are based on primary market data collected from developers, builders and brokers. The housing prices (in Rs per sq metre) are classified under three categories, based on the carpet area size at the city level: units less than 60 sq metres, units more than 60 sq metres but less than 110 sq metres and units more than 110 sq metres.

According to the NHB RESIDEX, composite housing prices in 50 Indian cities increased by only about 4% annually, between June 2013 and September 2020. On the other hand, in 2019, the HPI recorded an overall increase in 43 cities, decrease in five cities and no change in two cities, year on year. Annual growth in HPI ranged from 22.1% in Hyderabad to -6.8% in Chakan at the end of the April-June quarter of 2019.

So far, the NHB’s HPI represents the price changes in residential housing properties. Plans are also underway to develop a Housing Rental Index (HRI), Land Price Index (LPI) and Building Materials Price Indices (BMPI), to track the movement in rentals, land prices and building raw materials.

NHB’s Special Refinance Facility 2021 (SRF 2021)

Following the COVID-19 pandemic, the NHB provided refinance support of Rs 14,000 crores under the special refinance facility (SRF) and an additional special refinance facility (ASRF) during May-August 2020. This short-term liquidity support was part of the special liquidity facility (SLF) granted by the RBI at repo rate to the NHB, under the Atmanirbhar Bharat Abhiyan. From April 1, 2020 to March 31, 2021, the NHB has extended Rs 42,823.93 crores as refinance to PLIs, which included HFCs and scheduled commercial banks.

The NHB has also launched a similar facility for 2021. The objective of the NHB SRF 2021 is to provide short-term refinance support to HFCs and other eligible PLIs on flexible terms and conditions. An amount of Rs 10,000 crores shall be allocated under this scheme, to meet the short-term liquidity requirements of the PLIs and to support onward lending to individuals, to maintain growth in the housing finance sector.

National Housing Bank: Contact information

You can contact the NHB at:

Core 5A, India Habitat Centre,

3rd-5th floor, Lodhi Road,

New Delhi, 110003

Phone number: +91-11-24649031 to 35

Fax number: +91-11-24646988, 24649041

Email: ho@nhb.org.in

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