What are the activities of National Housing Bank?

The Sub-Group on Housing Finance for the Seventh Five Year Plan (1985-90) identified the non-availability of long-term finance to individual households on any significant scale as a major lacuna impeding the progress of the housing sector and recommended the setting up of a national-level institution.

Although housing is primarily a State subject, the Central govt. has been formulating National Housing Policies to guide the State Govt. to meet the growing housing shortage. This process started in 1986. This resulted in the first ever Housing Policy which was announced in May 1988. The National Housing Policy, of 1988 envisaged the setting up of NHB as the Apex level institution for housing. In pursuance of the above, NHB was set up on July 9, 1988, under the National Housing Bank Act, of 1987.

The Preamble of the National Housing Bank Act, of 1987 describes the basic functions of the NHB –

“… to operate as a principal agency to promote housing finance institutions both at local and regional levels and to provide financial and other support to such institutions and for matters connected therewith or incidental thereto …”

 In terms of the amendment made to the National Housing Bank Act, 1987, under the Union Budget announcements for 2019-20, the regulatory powers (including registration of HFCs) of the National Housing Bank over Housing Finance Companies (HFCs) were transferred to the Reserve Bank of India (RBI) with effect from August 9, 2019. The authorized capital of NHB currently stands at ₹1,450 crore and is fully subscribed by the Government of India.

NHB does not grant any loans directly to individuals. Refinance Schemes of NHB as applicable to various categories of Primary Lending Institutions (PLIs) viz, Scheduled Banks (including RRBs), HFCs, ACHFS and ARDBs, etc., along with the eligibility conditions to avail refinance are available at NHB’s website. PLIs desirous of availing refinance may send their applications as per the prescribed format for sanction of annual refinance limit (July-June).

The bank was set up to support housing finance for all segments of the population with a special focus on housing for low and moderate-income groups.

The facilities provided by NHB can be set out as follows;

1. NHB extends refinance to Primary Lending Institutions (PLIs) like Housing Finance companies, Commercial banks, RRBs, and Cooperative banks. Refinance is available for the eligible housing loans extended to individual beneficiaries and for the project loans extended by the banks and financial institutions to various implementing agencies.
2. NHB facilitates direct loans in respect of housing construction and the development of housing-related infrastructure by public agencies.
3. The repayment of principal and interest on bonds issued by the Housing Finance Companies which are guaranteed by the NHB.
4. NHB is acting as a Special Purpose Vehicle for securitizing the housing loan receivables.

The National Housing Bank offers concession in interest rates under refinance schemes in respect of the following types of loans.

• Loans up to Rs.10 lakhs,
• Loans in rural areas,
• Loans to women,
• Loan to person of third gender,
• Loans to disabled and differently-abled persons,
• Loan to SC/ST,
• Loan to green housing

Credit Risk Guarantee Fund Scheme for Low-Income Housing (CRGFS):

The credit Risk Guarantee Fund Scheme for Low-Income Housing (CRGFS) was formulated by MoHUPA (Govt. of India) in consultation with DFS, MOF. The objective of the scheme is to provide credit guarantee support to Collateral-free/third-party guarantee-free housing loans up to Rs.5 lakhs extended by eligible lending institutions for Low Income Housing in urban areas. NHB has been mandated to manage the Fund Trust under the scheme, set up by the Ministry of Housing and Urban Poverty Alleviation (MoHUPA), Govt. of India.

Originally posted on August 04, 2017, edited and reposted on 27.06.2024

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