Wasting domestic demand
The model will include a trust which will warehouse the loan papers, an agency like the National Housing Bank to create a special purpose vehicle that will securitise the papers by bundling them and a market where financial institutions with the demand for such long term papers turn up to buy them—typically insurance and pension funds.
This means all the financial sector regulators including RBI and the Irda have to permit banks and financial institutions to invest in these papers. But this remains a bugbear for all of them. Despite endorsement by authorities like C Rangarajan, securitisation remains voodoo for policy makers. On the state policy front, stamp duties and legal difficulties in marketing such papers makes the market impossibly costly to set up.
The result is the poor don’t get the houses, the demand for housing material remains muted and a powerful value-add for the economy lies untapped. Then how does one expect to climb out of the low growth rate of 5 per cent or thereabouts for the economy?
Subhomoy is a Deputy Editor based in New Delhi.
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