NHB's ACTIVITIES

REPORT ON TREND AND PROGRESS OF HOUSING IN INDIA - JUNE, 1999

NATIONAL HOUSING BANK (NHB)

NHB's ACTIVITIES
. Promotion and Development
7.1 During the year 1998-99, 3 more housing finance companies viz., Happy Home Profin Ltd., Chennai, Maharishi Housing Development Finance Corporation Ltd., New Delhi and Corpbank Homes Limited, Bangalore were included in the list of HFCs approved for refinance support from NHB. Thus, the number of HFCs approved for refinance support from NHB increased to 29 .

7.2 The guidelines for extending equity support by NHB to HFCs remained unchanged during the year 1998-99. The details regarding NHB's equity participation in HFCs till June 30, 1999 are given below :

Table 7.1: NHB's participation in equity of HFCs
(Rs. in Crore)
Name of the HFC Face Value Investment as on 31.03.99
1.Andhrabank Home Finance Ltd. 1.90 1.90
2.BOB Housing Finance Ltd. 2.50 2.50
3.CanFin Homes Ltd. 0.50 1.75
4.Centbank Home Finance Ltd. 1.60 1.60
5.GRUH FinanceLtd. 0.45 0.85
6. Vysya Bank Housing Finance Ltd. 0.38 0.56
7.. VI Bank Housing Finance Ltd 1.20 1.20
TOTAL 10.36

7.3 With a view to promote a healthy and responsive housing finance system, NHB continued to interact with the HFCs on various aspects, including matters relating to security for refinance assistance, guidelines for HFCs, introduction of variable rate mortgages, development of secondary mortgage market, mortgage default insurance, deposit insurance and training programmes, etc.

. Regulation of HFCs
7.4 During the year 1998-99, 5 new housing finance companies were included in the mailing list of NHB whereas, names of 29 companies were deleted from the mailing list as they were not engaged in housing finance business. The total number of HFCs under the regulatory ambit of NHB stood at 354 as on 30th June 1999.

7.5 Amendments to the Housing Finance Companies (NHB) Directions, 1989
Taking an overall view of developments in the area of deposit acceptance activities in the general financial sector, the Bank amended the Directions as applicable to HFCs, with effect from January 1, 1999. This was done in exercise of the powers conferred under Sections 30 and 31 of the National Housing Bank Act, 1987. [The salient features of certain important amendments are given in Annexure I ]

Supervision of HFCs
7.6 During the year 1998-99, NHB issued show-cause notices to 28 housing finance companies for the contravention of various provisions of the Housing Finance Companies (NHB) Directions, 1989. Further 15 HFCs were prohibited from accepting/renewing deposits, in contravention of the above Directions issued by the Bank . [List at Annexure II ]. The total number of HFCs prohibited for accepting/renewing deposits stood at 31 as at the end of June,1999.

. Refinance
Policy
7.7 Some modifications were made in the interest rate structure on refinance assistance. There was an upward revision of 50 basis points in the loan slab upto Rs. 50,000/- in urban areas w.e.f. 1.7.98 and downward revision of 75 basis points w.e.f. 1.4.99 in the loan slab of Rs. 5,00,001/- to Rs. 10,00,000/- in both urban and rural areas. The interest rate structure was in alignment with the general interest rates in the economy.

Interest Rate Structure
7.8 The rate of interest prescribed by NHB under its various refinance schemes (as on June 30, 1999) is shown below :

Table 7.2: Interest Rate Structure for Refinance Schemes of NHB

Size of the loan(Rs.) Refinance Rate (%)
Ruralas on 30.06.98 Ruralas on 30.06.99 Urban as on 30.06.98 Urban as on 30.06.99
HFCs' and Scheduled Commercial Banks' loans to individual beneficiariesFor construction/acquiring new dwelling units
Upto 50,000 10.00 10.00 11.00 11.00
50,001 to 2 lakh 12.00 12.00 12.50 12.50
Above 2 lakh upto 5 lakh 12.50 12.50 12.50 12.50
Above 5 lakh upto 10 lakh 14.00 13.25 14.00 13.25

For repairs & upgradation
Upto 50,000 10.00 10.00 11.00 11.00
50,001 to 1 lakh 12.50 12.50 13.50 13.50

Co-operative Sector* loans to individual beneficiaries
Upto 50,000 10.00 10.00 11.00 11.00
50,001 to 2 lakh 12.00 12.00 12.50 12.50
Above 2 lakh upto 3 lakh 12.50 12.50 12.50 12.50

For repairs & upgradation
Upto 50,000 10.00 10.00 11.00 11.00
50,001 to 1 lakh 12.50 12.50 13.50 13.50
*Includes Agricultural Rural Development Banks, State Co-operative Banks, Primary Urban Co-operative Banks and Apex Co-operative Housing Finance Societies

7.9 The refinance scheme for housing loans advanced by Housing Finance Companies to Community Based Finance Institutions (CFIs) for their onward lending to members of the Self-Help Groups was introduced in January, 1999 to help the poor, downtrodden and shelterless people to have a shelter of their own. Under the scheme, housing loans for acquisition or construction of new dwelling units and for up-gradation and major repairs, upto Rs.50,000 in urban areas and upto Rs.30,000 in rural areas are eligible for refinance assistance.

7.10 State Level Apex Co-operative Housing Finance Societies (ACHFS) were made eligible during the year under review for refinance assistance in respect of individual housing loans upto Rs.5.00 lakhs as compared to their earlier eligibility upto Rs.3.00 lakhs. The periodicity of repayment for ACHFS under the Golden Jubilee Rural Housing Refinance Scheme was changed from quarterly interval to half-yearly interval at the behest of ACHFS in tune with crop season.

Total Refinance Disbursals
7.11 During the year i.e. July 1998 to June 1999 , refinance assistance extended by NHB to all eligible primary lending institutions increased significantly from a level of Rs.524.15 crore in 1997-98 to Rs. 747.01 crore in 1998-99, showing an increase of 42.51% over the previous year. The cumulative refinance assistance provided by NHB to the primary lending institutions stood at Rs.4374.01 crore upto June 30, 1999. Category-wise, an amount of Rs.4139.51 crore has been provided in respect of housing loans for acquisition/construction of new dwelling units including repairs & upgradation of existing dwelling units and Rs.234.50 crore as project loans under LDSP schemes. Agency-wise, HFCs account for a major share in the total financial assistance provided by NHB who have availed themselves of refinance to the extent of Rs. 3398.06 crore (77.69%) followed by Co-operative sector institutions Rs.738.37 crore (16.88%) and scheduled banks Rs.237.58 crore (5.43%). Details of disbursements are as under:

Table 7.3: Refinance assistance provided by NHB
(Rs. in crore)
Institutions During the previous year(July 97 to June 98) During the currentyear(July 98 to June 99) Cumulative Disbursementup to30-Jun-99
No. of units Amount No. of units Amount No. of units Amount
Scheduled BanksCo-op. Sector InstitutionsHousing Finance Companies 7041492922473 8.45138.08377.61 45751722617861 38.76163.09545.16 46534228163401307 237.58738.373398.06
TOTAL 38106 524.15 39662 747.01 676004 4374.01
. Excluding the number of units refinanced under LDSP/RHP to the lending institutions and Line of Credit [LOC] to HUDCO & GIC HFL.

The amounts due from various Housing Finance Institutions viz. scheduled banks, cooperative sector institutions and housing finance companies during the year have been recovered in full, and accordingly the overdue position as on 30th June, 1999 is "nil".

Project Finance
7.12 Financial assistance is extended by NHB to various agencies in accordance with the guidelines, which have been formulated for the different schemes of project finance. Based on the feed back received from various agencies, the guidelines for financial assistance, both under refinance as well as direct finance windows, in respect of Land Development and Shelter Projects (LDSP). Housing Infrastructure Projects (HIP) and Slum Redevelopment Projects (SRP) pertaining to public agencies, were revised during the year 1998-99. The revisions in the guidelines are given below:

. Minimum cost of projects eligible for direct lending by NHB has been brought down from Rs. 5 crore to Rs. 2 crore.
. The average area of the plots has been increased to 150 sq.m. from 125 sq.m. earlier, and maximum plot size can now be upto 300 sq.m. as against 250 sq.m. earlier.
. The average built-up accommodation of dwelling units in a project can now be 90 sq.m. as against 75 sq.m. earlier and the maximum built-up accommodation can be 130 sq.m. as against 120 sq.m. earlier.
. Infrastructure projects can also include land cost, which is a fresh provision in the infrastructure guidelines.
. Both LDSP and Infrastructure projects can have a maximum repayment period of 15 years from the date of first release of funds by NHB.
. In the Slum Redevelopment Projects guidelines, the maximum ceiling on the loan amount has been raised to Rs. 90,000 as against Rs. 45,000 earlier. Loans upto Rs. 35,000 can now be availed at 8.00 % per annum and between Rs. 35,001 and Rs.90,000 at 11 % per annum.

7.13 The guidelines pertaining to LDSP for Professional Developers and Co-operative Housing Societies as well as those of Rental Housing Projects, in which financial assistance is provided through the refinance window, have been revised to bring them on lines similar to the LDSP guidelines for Public Agencies.

. Direct Finance
7.14 During the year 1998-99, under the direct finance window, NHB sanctioned three projects under its Land Development & Shelter Projects (LDSP) Schemes, with a project cost of Rs. 18.94 crore and loan component of Rs. 16.12 crore. During 1998-99, NHB has disbursed a sum of Rs. 14.76 crore under this category, for various projects. Cumulatively, nine projects with a project cost of Rs. 78.56 crore and loan component of Rs. 63.71 crore have been sanctioned under this window.

7.15 During the year 1998-99, under the direct financing scheme out of the special fund, , NHB sanctioned 13 projects with project cost of Rs. 22.59 crore and loan component of Rs. 17.01 crore. This takes the total number of projects approved under this category to 31, with a cumulative project cost of Rs. 43.99 crore and loan component of Rs. 32.98 crore. Direct finance of Rs. 1.21 crore was disbursed during 1998-99 for these projects, taking the cumulative disbursal under this category to Rs. 14.74 crore.

7.16 Slum Improvement & Low Cost Housing Fund : Refinance
In respect of the Special Fund (Slum Improvement and Low Cost Housing Fund) under the NHB (Voluntary Deposit) Scheme, 1991 ten projects with a project cost of Rs. 36.75 crore and a loan component of Rs. 23.30 crore have been approved, which should enable the construction of 17,732 dwelling units. These include six projects for rural EWS housing units and four projects of urban EWS housing units. Refinance of Rs. 11.29 crore towards this has been disbursed during 1998-99.

. Training
7.17 To meet the growing need for larger human resource development in the housing finance sector, NHB designed & conducted 11 training programmes for the various institutions active in the housing finance sector. These included HFCs , public sector banks, co-operative sector institutions and housing boards. These covered programmes ranging from orientation programmes to specialised programmes for faculty members of institutions' own training establishments. Upto 30th June, 1999 NHB had cumulatively conducted 37 training programmes.

. Golden Jubilee Rural Housing Finance Scheme
7.18 Pursuant to the Union Budget announcement by the Hon'ble Finance Minister in 1997, NHB formulated the Golden Jubilee Rural Housing Finance Scheme (GJRHFS), which was launched on the occasion of the fiftieth anniversary of India's independence. The principal objective of the Scheme is to address the problem of housing shortage in the rural areas through improved access to institutional credit for housing. The scheme envisages provision of institutional credit to individuals desirous of constructing or acquiring new dwelling units and for extensions or repairs of existing units in rural areas, which would enable an individual to build a modest house or improve or add to his existing dwelling unit in rural areas.

7.19 Under the scheme, housing loans would be given for construction, purchase or improvement of houses in rural areas. The GJRHFS envisages lending with due regard to the viability and bankability of the cases, without any compromise in the appraisal, etc. norms followed by the lending institutions. The Scheme is being implemented through Scheduled Public Sector Commercial Banks, Scheduled State Co-operative Banks, Regional Rural Banks (RRBs), dedicated housing finance institutions, viz. the Housing Finance Companies (HFCs) and the Apex Co-operative Housing Finance Societies (ACHFS), as also through the Co-operative Agriculture and Rural Development Banks (ARDBs).

7.20 The target of financing 50,000 dwelling units under the captioned scheme during its first year of operation (1997-98) was met. The target for the second year (1998-99), of financing 1 lakh units was also achieved. In the budget announcement for the year 1999-2000, an enhanced target of financing 1.25 lakh units under the Scheme has been set. To enhance awareness about the scheme among both, borrowers and the lending institutions, NHB has brought out posters, booklets and brochures, besides providing training support to the lending institutions. Progress of the scheme was also reviewed, inter alia, at the State Level Bankers Committee meetings and review meetings convened by NHB at the zonal level. Details of the targets and achievements for year 1997-98 and also the targets for 1998-99, for the HFCs, Banks and Co-operative Sector Institutions, are furnished below:
(Number of units)
1997-98 1998-99
Institutions Target Achieved Target Achieved
HFCs 18900 23289 38900 35266
Banks 30000 11146 50000 25951
Co-operatives 1100 16837 11100 64514
Total 50000 51272 100000 125731