India sees debut listing of residential mortgage-backed securities

India saw the listing of its first residential mortgage-backed securities sold through the bidding route on Monday.

The housing finance regulator expects firms to raise Rs 10,000 crore to Rs 20,000 crore  ($1.2 billion to $2.4 billion) through these instruments in the current financial year.

The funds would be raised across seven to 10 transactions over the year, National Housing Bank Managing Director Sanjay Shukla said in Mumbai. 

Residential mortgage-backed securities, securities with residential mortgages as the underlying asset, are common across global markets.

Non-bank financier LIC Housing Finance last week raised Rs 1,000 crore through 20-year securities at a coupon of 7.26 per cent, payable on a monthly basis. It listed these on the National Stock Exchange of India on Monday.

 

In March, the National Housing Bank set up a firm to facilitate the development of the residential mortgage-backed securities market by providing opportunities to long-term investors like insurers, pension and provident funds.

For LIC Housing Finance's issue, a special purpose vehicle India Residential Mortgage Trust 2025 01 issued pass-through certificates backed by a housing loan receivables pool of Rs 1,112 crore originated by the financier. 

The notes are rated AAA (SO) by CRISIL and CARE.

The successful placement of LIC Housing's securities will help other housing finance companies to issue similar ones, said Venkatakrishnan Srinivasan, founder and managing partner at debt advisory firm Rockfort Fincap.