NHB to set up mortgage finance firm by FY12-end

State-run National Housing Bank (NHB) plans to set up a mortgage finance company by the end of this financial year. The housing finance watchdog, wholly owned by the Reserve Bank of India, will compensate banks and housing finance companies in case of default by home loan borrowers.

The apex housing finance institution has identified Asian Development Bank and International Finance Company as the two partners. It is looking for a third strategic partner for technical expertise, which will have a 36 per cent stake in the proposed entity. “We are hoping for an approval from the Foreign Investment Promotion Board well before December 31. The company will be set up by March 31 next year with an initial capital of Rs 120 crore and an authorised capital of Rs 750 crore,” NHB Chairman R V Verma said at the annual result announcement meet here on Monday.

The application for the mortgage finance company will be sent to the Reserve Bank of India by January next year and the company is expected to start operating from April 1.

NHB’s net profit was flat for 2010-11 at Rs 279 crore, against Rs 280 crore a year ago. Verma said NHB was not a profit-oriented business; however, it was a difficult year for prime lending institutions and certainly more difficult for refinancing institutions to struggle with the market dynamics. “However, the volumes are growing and the average loan size stands at Rs 5 lakh. We compress our spread to increase our volume,” said Verma. “We are not profit hungry at the cost of volumes,” he added. The net and gross non-performing assets were ‘nil’,with 100 per cent collection efficiency. According to Verma, the net interest margin was under pressure in 2010, which affected the bottom line. “It is sub-one per cent,” Verma added.

NHB will focus on development of market infrastructure to bring stability in the housing market.

NHB Residex, the residential property price index launched this year, will include five more cities from January next year — Ludhiana, Vijayawada, Indore, Guwahati and Bhubaneswar.

The apex housing finance institution granted registration to five new housing finance companies in 2010, taking the total number to 52.

NHB had been issuing direction and guidelines to the housing finance companies to ensure development of the housing sector on healthy and sustainable lines.

“It is the quality of assets that is engaging our attention as there is growing risk perception in the market”, said Verma.