A well-developed securitisation market can emerge as source of funding for home loan lenders.
India needs around 10 crore additional housing units by 2022, which calls for an investment of Rs 115 lakh crore. A committee set up by the Reserve Bank of India has recommended setting up of a government-sponsored intermediary under the National Housing Bank (NHB) for the development of the home loan securitisation market.
The panel has suggested exemption of stamp duty for mortgage-backed securitisation. It has also suggested that loan documentation must be standardised for housing loan and NHB should establish the loan origination standards on a priority basis.
Securitisation involves pooling of loans and selling them to a special purpose vehicle. It is a mechanism to convert illiquid loans on the lenders balance sheet into tradeable securities. A well-developed securitisation market can emerge as source of funding for home loan lenders. The total volume of securitisation has grown from Rs 23,545 crore in 2006 to Rs 2,66,264 crore in 2019.
By the end of FY2022, the report estimates that outstanding home loans would reach Rs 35 lakh crore, a compounded annual growth rate of 20% since FY19. Banks account for 58% of the outstanding home loans and the rest is from housing finance companies. India has a very low mortgage-to-GDP ratio compared to other countries and the ratio is expected to grow significantly over the next few years.