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Catalyst for the housing finance market

Dr Sanjeev Sharma

         Dr Sanjeev Sharma

National Housing Bank is the apex institution for housing finance in the country. It was set up under the National Housing Bank Act, 1987 and commenced operations on 9 July 1988 when the housing finance market in the country was in a very nascent stage. In the 2½ decades since then, the bank has played a seminal role in the development of the market that has grown to the present size and state.

“Facilitating and catalyzing the credit flow in the housing sector, NHB’s enabling policies have supported the expansion in home ownership in the country, says Dr Sanjeev Sharma, ED.

The housing finance industry encompasses the entire banking sector, housing finance companies and cooperative sector institutions. From its early years, amidst rapidly changing market dynamics, attendant on liberalization and deregulation, NHB had to steer a nascent sector through the transition from a controlled economy to a competitive and market oriented system. That retail housing finance is, today, available from a diverse set of institutions at competitive terms and also that the lending community has found a good and sustainable business model in retail housing finance, can to some extent be attributed to the efforts of NHB.

The bank’s activities are divided into three broad areas – regulation and supervision, financing and promotion & development.

As the regulatory body for housing finance companies, NHB is responsible for registration and regulation of these entities. It strives to create a conducive and responsive environment for them to function. The number of HFCs in the country has grown over the years and is currently at 71. Under the regulatory role, NHB issues statutory directions to these HFCs relating to their conduct of business, acceptance of deposits, deployment of funds, quality of assets, provisioning, accounting and income recognition directions, besides capital adequacy, asset liability management system, KYC and anti-money laundering, fair practices code, etc. Its initiatives on developing the market infrastructure are aimed at improving the robustness and stability consistent with the growing market. Transparency and efficiency are key to the development of a sustainable demand-driven housing finance system. NHB is helping promote these aspects of the market through a number of regulatory and promotional measures, including moral suasion and awareness building in the industry.


NHB has the mandate of promoting, developing and nurturing a healthy housing finance market in the country. Towards this, it undertakes a varied mix of activities involving wholesale financing to the lending institutions, developing new products, supporting the design and implementation of various schemes and programmes including formulation of the housing and housing finance policies, advisory support to the central and state governments, functioning as nodal agency for various government schemes, capacity building in the sector for various stakeholders, etc. Owing to various reasons, the housing finance market in its growth phase gravitated majorly towards the higher and middle income segments, and customers having mainly formal sector and fully documented income streams, while the lower income segments were left relatively untouched. This is one of the main reasons for the high quantum of housing shortage among the lower income and informal income segments of the society today. In recognition of the need to correct this anomaly, the bank has, over a number of years, been focusing on improving the lower income segments’ access to institutional housing finance through various initiatives and policy level interventions aimed at adapting the existing market infrastructure as well as creating new products catering to these segments. Several breakthrough initiatives by NHB have started having an impact on the risk mitigation ecosystem of the housing finance industry and are expected to go a long way in improving the overall risk profile of the industry.

On the technology front, NHB has taken certain crucial initiatives such as development of the online portal, Grievance Registration & Information Database System (GRIDS) wherein the complaints against the Housing Finance Companies (HFCs) can be filed online by their customers.

NHB believes that housing finance market in India is one of the important sectors of the country owing to its linkages and interconnectedness with the other segments of the economy. It feels the market today stands poised for a major paradigm change in terms of institutional depth, product range, competition and consumer choice. On the back of the growing institutional depth in the housing finance market, the  coming years hold the promise of huge expansion in housing investments, leading to increased home ownership among all segments of the population.

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