Nhb, Sidbi To Float Tax-Free Bonds

The National Housing Bank (NHB) and Small Industries Development Bank of India (Sidbi) have firmed up plans to issue capital gains tax-exempt bonds next month.

Taking advantage of the tax benefit available under Section 54 E C of the Income Tax Act, the institutions are looking at raising Rs 1,000 crore each from the issue.

NHB executives and Sidbi chairman P B Nimbalkar confirmed the move. The issue will be available to investors on-tap. The institutions will soon finalise their collecting bankers and issue arrangers.

"We are making all out efforts to reduce the cost of funds and these bonds will help in extending refinance to a larger group of housing finance companies," R V Verma, executive director, NHB, said.

The government had given the I-T benefits to NHB and Sidbi in this year's budget. National Bank for Agriculture and Rural Development, National Highways Authority of India and Rural Electrification Corporation have also been given allowed to issue capital gains-exempt bonds.

NHB is also looking at securitisation of housing loans of another Rs 1,000 crore to reduce its cost of funds.

Verma said securitisation has generated interest among banks and housing finance firms, especially after the Reserve Bank of India announced sops in the monetary and credit Policy in April. "There is a lot of demand for mortgage-backed securitisation (MBS) now," he said.

Sources said that Citibank and NHB have arrived at an agreement to securitise nearly Rs 100 crore home loans in the next round of MBS issue and IDBI Bank is also in talks with the housing finance regulator.

The next round will see securitisation of assets of about Rs 200 crore drawn from a pool of loans extended by BOB Housing Finance and PNB Housing Finance.

NHB has also received $40 million (about Rs 200 crore) credit from the Asian Development Bank (ADB), of which $20 million has already been drawn.

Sources said NHB will soon decide on the timing of drawing the remaining $20 million credit from ADB. The 25-year loan, with five-year moratorium, carries an interest of Libor-plus 60 basis points. NHB, which also has a $100 million line of credit, signed the agreement with ADB in 2000-01.