NHB Launches Ambitious Initiative to Boost Residential Mortgage-Backed Securities Market
India’s housing finance market is set to receive a major boost with the launch of a new initiative by the National Housing Bank (NHB). In collaboration with the Reserve Bank of India, the NHB has introduced a strategic plan to promote growth in the Residential Mortgage-Backed Securities (RMBS) market. This move aims to propel India’s housing finance sector forward and cater to the increasing demand for housing loans.
RDCL: A Distinctive Entity for RMBS Development
As part of this forward-looking initiative, the NHB will establish a new entity called RMBS Development Company Limited (RDCL). With NHB as the largest shareholder, along with investments from other leading investors such as one of India’s biggest insurance companies, private banks, and large housing finance companies (HFCs), RDCL is poised to revolutionize the RMBS market. Grihum Housing Finance Ltd (Grihum) has also approved an equity investment of up to Rs. 35 crores in RDCL.
A Promising Housing Finance Market and Growth Opportunities
India’s housing finance market, estimated at Rs. 30 lakh crores in FY23, is expected to double soon. This growth is driven by factors such as structural economic development and urbanization trends in the country. Notably, the affordable housing segments (EWS, LIG, and MIG) are expected to contribute significantly to this growth. Housing Finance Companies, especially Affordable Housing Finance Companies (AHFCs), have a substantial opportunity to expand their operations and cater to the underpenetrated mortgage market. This supports the government’s objective of financial inclusion by offering financing options to customers who are not served by mainstream lenders.
The Role of Housing Sector in India’s Economic Growth
With the aim of reaching a USD 5 trillion economy by FY28, the Indian government recognizes that the housing sector will play a pivotal role in achieving this objective. As housing finance experiences resilient growth in mortgage penetration, it contributes to the overall economic growth. This initiative by the NHB aligns with these goals and signifies a collaborative effort among financial institutions to create a deep and vibrant market for RMBS in India.
Expanding the Scope of NHB’s Initiative
The NHB’s initiative encompasses various objectives. It includes investments in RMBS, facilitating investment, issuance, and trade of RMBS, extending credit enhancement for RMBS transactions, and providing essential liquidity support for the secondary market of RMBS. This comprehensive approach ensures liquidity, stability, and affordability in the Indian Housing Finance market. By diversifying funding sources and unlocking additional capital from diverse investor groups, such as insurance companies and retirement funds, RMBS offers a compelling solution to address the increasing financial requirements of housing finance companies.
A Strong Commitment to Affordable Housing Market Growth
Manish Jaiswal, Managing Director and CEO of Grihum, emphasizes that NHB’s initiative is a crucial step in meeting the rising demand for housing loans. By fostering sustained growth in the dynamic affordable housing market, RMBS strengthens the Asset-Liability Management (ALM) of Housing Finance Companies. It also harnesses additional capital from various investor groups, ensuring the expansion of the housing finance sector for years to come. The NHB’s latest initiative is a watershed moment in India’s housing finance market development. With ambitious goals, strong collaboration, and a focus on creating a robust RMBS market, India is poised to further propel its housing finance sector and contribute significantly to the overall growth of the economy.
