NHB to offer refinance at 8%, to raise Rs 3,000 cr via bonds

Written by Banking Bureau | Kolkata | Updated: Dec 31 2008, 07:45am hrs
National Housing Bank (NHB), the state-run agency that promotes housing finance institutions and provides financial and other supports to such institutions, plans to raise Rs 3,000 crore by June next year.

The bank is also offering refinance to other housing finance companies at 8% for the housing loans of up to Rs 20 lakh. It has also reduced the prime-lending rate to 10.75% from 11.25%. The current normal refinance rate of NHB is between 9 and 9.5%. Of the total housing loan portfolio of HFCs, 63% consists of loans up to Rs 5 lakh.

NHB chairman S Sridhar said, "Our fund-raising plans will depend on demand. We plan to raise Rs 3,000 crore primarily via bonds by June 2009. This will be in addition to Rs 4,000 crore refinance facility from the Reserve Bank of India." The money would be raised mainly through bonds, he said.

"Our last borrowing, which was a zero coupon bond with effective interest rate of 8%, was 10 days back," Sridhar said.

The demand for the RBI's refinance lifeline by HFCs has already surpassed Rs 4,000 crore offered in days, he said. The disbursement to HFCs would be done in the next two to three weeks as per a formula as demand has exceeded, the NHB chairman added. The bank, a subsidiary of the RBI, already raised Rs 7,800 crore in the first half of 2008-09. It had raised Rs 12,100 crore in 2007-08 and Rs 13,200 crore in 2006-07. "We do not have any immediate plans to raise funds from overseas markets," the chairman said.

In a bid to help the housing sector get the required finance through housing finance companies, the RBI has provided Rs 4,000 crore to NHB this month against its loans and advances to those companies. The utilisation of the funds will be governed by the policy approved by the NHB board.

Present at a workshop on reverse mortgage here on Tuesday, Sridhar said, "We expect housing finance companies to further reduce rates." Many such companies have already reduced rates by 50-75 basis points. I expect them to cut rates further," he said.

Sridhar said the bank is setting up counselling centers for reverse mortgage in eight cities. Four of them are already functioning. The centers are being run in assistance with non-government organisations.

According to a recent NHB survey, southern and eastern parts of the country are more conservative in approach towards mortgaging house for a regular flow of income compared with western and northern parts.