National Housing Bank (NHB) is a specialized financial institution established by the Government of India in 1988 under the National Housing Bank Act, 1987. NHB operates as the principal agency for promoting housing finance institutions and regulating the housing finance sector in India. It facilitates the growth and development of the housing finance market by providing financial assistance, refinancing housing loans, and regulating the activities of housing finance companies (HFCs). NHB also acts as a lender of last resort for HFCs, ensuring stability in the housing finance sector. Additionally, NHB implements various schemes and initiatives aimed at promoting affordable housing and increasing homeownership across different segments of society.
History of National Housing Bank:
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Formation and Objectives:
The creation of NHB was part of the Government of India’s strategy to promote and strengthen the housing finance sector to provide adequate housing finance for the various segments of the population and to enhance the housing stock in the country. The institution was formed with the objective of improving housing conditions and increasing the availability of affordable housing.
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Liberalization and Growth:
The 1990s, a period of economic liberalization in India, saw the NHB playing a pivotal role in revitalizing the housing sector by liberalizing its policies and enabling private sector participation. The NHB facilitated the flow of institutional credit to the housing sector, thereby fueling growth in housing and real estate development across India.
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Regulatory Role:
In addition to its promotional role, NHB also took on a regulatory function. It was tasked with regulating the activities of housing finance companies based on directives and guidelines that it periodically issued. This regulatory role aimed to ensure the sound and orderly growth of the housing finance sector.
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Disinvestment by RBI:
A significant change in the governance structure of NHB came in 2019 when the Government of India amended the NHB Act, transferring ownership from the RBI to the Government. This move was part of a broader governmental initiative to separate regulatory and developmental roles of financial institutions.
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Recent Developments:
The recent focus of the NHB has been on promoting affordable housing through various refinancing schemes and initiatives such as the Pradhan Mantri Awas Yojana (PMAY). NHB has been actively working to align itself with national housing goals, focusing on sustainable and inclusive growth of the housing finance market.
Role of National Housing Bank:
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Regulator of Housing Finance Companies (HFCs):
NHB acts as a regulator for housing finance companies in India. It sets regulatory frameworks and guidelines to ensure the sound and prudent functioning of these institutions. This includes overseeing their operations, ensuring transparency, and maintaining financial stability in the housing finance sector.
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Promoter of Housing Finance Institutions (HFIs):
NHB promotes the establishment of new housing finance institutions and supports existing ones. It provides support through various means such as refinancing facilities, equity participation, and other financial assistance to enhance the institutional infrastructure for housing finance.
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Financier and Refinancer:
One of the core functions of NHB is to provide refinancing support to housing finance institutions and banks for housing loans. This is aimed at increasing the availability of funds for housing, ensuring the liquidity of housing finance institutions, and reducing their cost of funds.
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Developer of the Housing Finance Market:
NHB plays a critical role in developing the housing finance market by introducing innovative financing methods and products. It works towards making housing finance accessible and affordable for different segments of the population, including low and moderate-income groups.
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Facilitator of Affordable Housing:
NHB implements and manages various government schemes aimed at promoting affordable housing. These include the Pradhan Mantri Awas Yojana (PMAY) and other initiatives that aim to provide housing for all by facilitating easier access to financing.
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Catalyst for Mortgage-Backed Securities (MBS):
NHB has been instrumental in developing the market for mortgage-backed securities in India. It facilitates the securitization of housing loans, which helps in diversifying risk and mobilizing additional resources for the housing sector. This not only strengthens the housing finance system but also contributes to the broader financial markets by introducing new investment avenues.
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Implementer of Government Policies:
NHB acts as the primary agency to implement various government policies related to housing. It is responsible for executing national housing strategies and programs as directed by the government, ensuring that policy initiatives reach their intended beneficiaries and contribute effectively to the housing sector’s growth.
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Resource Mobilizer for Housing Development:
NHB mobilizes resources both from domestic and international markets for housing and urban development. It accesses various funding sources to provide long-term financing at reasonable costs, thereby facilitating sustainable housing development across the country.
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Promoter of Homeownership Education:
NHB undertakes initiatives to educate and inform the public about the benefits of homeownership, mortgage options, rights, and responsibilities of borrowers. This education helps in creating informed customers, reducing the risk of defaults, and promoting financial literacy related to home ownership.
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Innovator for Housing Finance Solutions:
NHB continuously explores and introduces innovative financing solutions and products to meet diverse customer needs. This includes developing schemes for special groups like the economically weaker sections (EWS) and low-income groups (LIG), thus fostering inclusive housing finance solutions.
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Risk Manager for the Housing Sector:
NHB plays a critical role in risk management by setting prudential norms for housing finance companies. It ensures that these companies have adequate risk management systems and liquidity to operate safely and effectively in the housing finance market.
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Research and Development Facilitator:
NHB conducts and facilitates extensive research on the housing market and housing finance systems. By analyzing trends, demographics, and economic impacts, NHB provides valuable insights and data that help in policymaking and strategic decisions in the housing sector.