NHB funds mortgage lenders to lend loans to low-income groups
New Delhi- National Housing Bank (NHB) is planning to offer a special refinance scheme to mortgage lenders for loans to urban low-income housing groups to buy affordable houses.
With this move, the housing finance regulator is likely to create a long-term market for fixed-rate housing loans and boost affordable housing. The new refinance scheme for providing loans to low-income households has recently got the approval of the NHB board and is expected to start off from the next fiscal.
The NHB will fund the mortgage lenders, including banks and housing finance companies at 150 basis points less than its prime lending rate, which will work out to around 8.5 percent. Currently, banks are lending at 11.5 percent. One basis point is 0.01 percentage point.
The mortgage lenders and banks will then offer loans to low-income borrowers at concessional fixed interest rates and insulate them from the volatility of rates.
This move of the NHB would motivate the primary lending institutions to lend more to low-income buyers whose income does not exceed Rs 15,000 a month and also those in the informal sector.
According to the scheme, borrowers with an annual income of up to Rs 2 lakh can get a 15-year loan from banks or housing finance companies at concessional fixed interest rates. This scheme will facilitate buyers to buy houses which cost around Rs.10 lakh and also the borrowers are given longer tenure to repay their loans at lower fixed rates.
NHB had disbursed Rs 14,000 crore in July-June 2011-12, of which around 35 percent went towards housing loans up to Rs 5 lakh. The housing finance regulator plans to increase this to 40 percent in the current year, July-June 2012. The credit guarantee fund, that was set up in August 2012 with a corpus of Rs.1,000 crore, will guarantee home loans up to Rs 5 lakh.
NHB believes that the prevailing high demand for affordable residential projects in India will encourage builders to offer houses in the Rs 10-15 lakh range in the suburbs of cities and towns. Currently, there is a shortage of supply of nearly 20 million housing units, of which 95 percent is for low cost houses.
However market analysts are doubtful about the scheme’s success. Owing to high costs of land in leading cities, the real estate developers are ready to abide by government rules and schemes. But once the rates start sliding, the developers would surely want to get back to the city areas as the demand is there.
As per market analysts, this demand can be met only if the government takes up measures such as providing subsidy for land area, modifying policies to cut costs, etc and if developers start using new and efficient technologies in order to reduce construction costs.
Few realty market experts are of the opinion that though there is good demand, supply may not match it. Since there is high demand for low-cost housing, it is difficult to estimate in which range of rates the demand actually exists. Industrial areas like Manesar, Greater Noida, Sanand in Gujarat or Chikmagalur in Chennai are observing high demand in housing for LIG and Economically Weaker Section (EWS). As a result of labour migrations, these industrial complexes will create good local demand for residential properties.
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Affordable houses, buy house, fixed-rate housing loans, Home loans, Housing finance companies, Housing finance regulator, housing for LIG, Low-cost housing, low-income housing groups, mortgage lenders, National Housing Bank, New Delhi, refinance scheme, Residential projects in India
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