NHB to launch over 80 new housing finance companies, says top official

NHB will work with RBI to address issues like loan retention and capital requirement, National Housing Bank MD and CEO Sriram Kalyanraman says

In line with the Centre’s ambitious plan to provide housing for all by 2022, Delhi-based National Housing Bank (NHB) is gearing up to spawn 80 new housing finance companies (HFCs). The focus will be on financing affordable houses.

The idea is mooted by Sriram Kalyanaraman, the new managing director and chief executive of NHB. Kalyanaraman moved to NHB in July from Mumbai-based credit information bureau Equifax Credit Information Services.

A wholly-owned subsidiary of the Reserve Bank of India (RBI), NHB’s task is to regulate, develop and refinance HFCs.

At present, there are 66 active HFCs in the market. According to rating agency ICRA, HFCs’ loan portfolio grew 22 per cent to Rs 5,23,800 crore in March 2015, from Rs 4,29,800 crore in March 2014.

HOME TRUTHS

• A wholly-owned subsidiary of the Reserve Bank of India (RBI), NHB’s task is to regulate, develop and refinance HFCs
• At present, there are 66 active HFCs in the market. According to rating agency ICRA, HFCs’ loan portfolio grew 22 per cent to Rs 5,23,800 crore in March 2015, from Rs 4,29,800 crore in March 2014
• The portfolio of new players in the affordable housing segment stood at Rs 6,500 crore as on March 31, 2015. This segment could continue to grow at a compounded annual growth rate of 50 per cent over the next three-to-five years

“If the goal of housing for all by 2022 is to be reached, the number HFCs in the region should be 150, up from the current 66,” said Kalyanaraman.

HFCs need hand-holding
HFCs need differential treatment. Most of HFCs can’t compete with banks on loans in the Rs 30-40 lakh space. HFCs offer financing to a segment where the emphasis is on understanding the socio-economic conditions of customers.

NHB would work with RBI to meet its capital requirements. Kalyanaraman intends to push for some comfort to HFCs on retaining loans for a certain period, say 12-18 months. “They (HFCs) need some sort of protection at least for the initial period from balance transfers (takeover loans),” he said.

The purpose is to give finance for housing and not just look at growing outstanding loan book.

HFCs go and acquire those customers, which others are not willing to underwrite. For HFCs, the upfront cost to acquire a customer is Rs 2,000.

Affordable housing finance
Affordable housing finance is a rapidly growing niche segment. NHB is giving a fresh look to ways for taking equity stake into HFCs and create some form of new instruments to help them.

According to rating agency ICRA, the overall market size is Rs 67,800 crore. The portfolio of new players in the affordable housing segment stood at Rs 6,500 crore as on March 31, 2015. This segment could continue to grow at a compounded annual growth rate of 50 per cent over the next three-to-five years.

There will be challenges emerging from promoting new entities. The regulator would have to figure out ways to keep an eye on their governance and ensure HFCs stick to the ground rules for servicing the lower-end customers.

Rejuvenating a body
While NHB improves regulation under the wings of RBI, the real work is cut out in the area of development, refinance and capacity building.

NHB’s goal is to become a knowledgeable regulator for the housing finance sector and provide more refinance for those serving the low-end segment.

This calls for breakaway from the present ways of working at NHB. While conceding there are challenges ahead, Kalyanaraman does not see them as hurdles.

“Neither the current structure nor bandwidth will be a constraint. The moment people see that you are implementing things, support will come your way for increasing people strength or make changes in the structure.”