Seizure Law To Make Housing Loans Cheaper

The extension of the Securitisation Act to cover housing finance companies (HFCs) is likely to result in lower interest rates and lower processing fee for customers.

National Housing Bank Executive Director R V Verma said since foreclosing a property would become easier, the risk perception of housing finance companies was likely to decrease.

This will lead to a larger flow of funds in the sector, even to categories like self-employed and lower income groups who were earlier on the threshold of credit worthiness.

Larger flow of funds and decreased risk perception would result in lower levels of interest rates for borrowers, he added. Verma said the move would also help in securitisation of loans since housing finance companies would have a cleaner portfolio.

He added that housing finance companies would have to use this mechanism in a responsible manner without arbitrariness and with due regard to the interest of borrowers.

More than the ability to bring down the level of non-performing assets in housing finance companies, which are only around 2-3 per cent of the portfolio, the mechanism will act as a deterrent for borrowers to default.

Even the housing finance companies agree. V P Choudhary, managing director, PNB Housing Finance, said this tool in the hands of housing finance companies will send the right message to investors and will help shore the recovery levels from the current 2 per cent to 1 per cent.