The Hindu Business Line : NHB awaits nod for setting up mortgage guarantee company

Mr C.K.Dhanuka (left), Chairman, FICCI (Eastern Regional Council), with Mr S. Sridhar, Chairman and Managing Director, National Housing Bank, at a banking conclave in Kolkata on Friday.

Our Bureau

Kolkata, June 27 The slowdown in demand for housing loan could be attributed to the increase in property prices rather than the rate of interest, Mr S. Sridhar, Chairman, National Housing Bank, said here today. He was speaking to reporters on the sidelines of a banking conclave organised by FICCI.

“The interest rate on housing loans has not seen a sharp increase. In fact, some banks had reduced the rate of interest on loans in February this year. The current increase in rates announced by some banks will only restore the older rates,” he said.

Joint VENTURE

NHB is awaiting the Reserve Bank of India’s approval to set up a non-banking finance company (NBFC) for mortgage guarantee, as a joint venture with foreign partners.

The bank would have the single largest equity in the NBFC to be set up in partnership with the US-based United Guaranty Corporation, International Finance Corporation and American Development Bank.

Mortgage guarantee would be provided at a reasonable fee, he said. While the guarantee on housing loan would help mitigate the risk arising out of possible defaults for banks, it would be beneficial for borrowers as banks might consider reducing interest rates for those going in for the guarantee.

As regards the capital requirement of the company, he said, “As per the RBI norm, the minimum capital requirement for the NBFC is Rs 100 crore. Our capital might be even higher than the stipulated sum,” Mr Sridhar said without divulging details.

The reverse mortgage scheme is a niche product and will soon gain acceptance among senior citizens.

“We will see demand pick up once we get clarifications on tax related issues,” he said. In an effort to educate senior citizens about the finer details of the product, NHB would be conducting workshops across the country. It also plans to set up a call centre to cater to the needs and various queries regarding the scheme on a toll free basis.

NHB plans to raise Rs 11,000 crore in 2008-09, of which Rs 3,000 crore would be through zero coupon bonds and another Rs 1,000 crore would be raised by way of retail deposits.

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