HC 4.

3: FINANCIAL SERVICES
M.Com Fourth Semester
HOUSING FINANCE
MEANING :

• Housing finance is a business of financial intermediation wherein the money raised

through various sources such as public deposits (which are subject to the regulatory
stipulations of NHB), institutional borrowings (from banks), refinance from NHB and
their own capital, is lent to borrowers for purchasing a house.
• These intermediaries lend money by accepting mortgage by deposit of title deeds of the
residential property.
HOUSING-FINANCE INSTITUTIONS (HFIs) :
There are different types of institutions which cater to the need of long-term finance, for housing in
urban and rural areas. They are:

• Scheduled Commercial Banks (SCBs)

• Scheduled Cooperative Banks
• Regional Rural Banks (RRBs)
• Agriculture and Rural Development Banks (ARDBs)
• Housing-finance Companies (HFCs)
• The National Cooperative Housing Federation of India (NCHF)
• Apex-cooperative Housing Finance Societies (ACHFS)
 The prominent players in this industry continue to be housing finance companies (HFCs) and
commercial ( local as well as foreign) banks.

SCHEDULED COMMERCIAL BANKS (SCBs) :

• These banks have floated housing-finance arms to avail the national housing bank’s refinance
facilities and tax concessions available to HFCs.
• Both public and private sector as well as the foreign banks large network and access to the
low-cost retail deposits have helped them to offer home-loan products at competitive rates,
giving a stiff competition in the housing-finance business by the HFCs.
• Housing loans enjoy the largest share of 50 percent in the retail-loan portfolio of the banks.
• Banks have to earmark 3 percent of incremental deposits to finance housing activities, and this
financing becomes a part of 40 percent priority-sector lending.
• More over, security by way of mortgage of property and robust demand, has been a major
consideration for banks to lend to this sector.
HOUSING FINANCE COMPANIES (HFCs) :

• A housing finance company (HFC) is a company which mainly carries on the business of
housing finance or has one of its main object clauses in the memorandum of association, of
carrying on the business of providing finance for the housing.
• A HFC is required to have certificate of registration from NHB, a minimum net-owned funds
of Rs200 lakhs.
• About 43 HFCs have been granted certificate of registration under section 29A of the NHB
act,1987.
• Of 43 HFCs, only 20 can accept public deposits.
NATIONAL HOUSING BANK (NHBs) :

• It is the apex-level financial institution for the housing sector.

• The national housing bank NHB is a wholly owned subsidiary of the RBI and the regulator of non-
banking HFCs.
• The NHB was established on July 9 1988, under an act of parliament, namely, the National Housing
Bank Act, 1987, to function as a principal agency to promote HFIs and to provide financial and
other support to such institutions.
• The act, inter alia, empowers NHB too:
• Issue directions to HFIs to ensure their growth on sound lines,
• Make loans and advances and render any other form of financial assistance to scheduled banks and
HFIs or to any authority established by or under any central, state or provincial act and engaged in
slum improvement and
• Formulate schemes for the purpose of mobilization of resources and extension of credit for housing.
ROLE OF NHB IN HOUSING FINANCE :

• Promotion and development of HFIs

• Regulation and supervision of HFCs
• Refinancing
• Project lending
• Development of a secondary mortgage market.
THANK YOU