The National Housing Bank (NHB) of India has launched an initiative to bolster the housing finance market, focusing on Residential Mortgage-Backed Securities (RMBS) in collaboration with the Reserve Bank of India. The plan includes forming the RMBS Development Company Limited (RDCL), with NHB as the major shareholder and significant investments from insurance companies, private banks, and Housing Finance Companies (HFCs) like Grihum Housing Finance Ltd (Grihum). With India's housing finance market expected to double soon, especially in catering to economically weaker sections, lower-income, and middle-income groups, this initiative aims to drive economic growth, financial inclusion, and affordability while diversifying funding sources for HFCs.
The National Housing Bank (NHB) of India has announced an initiative aimed at boosting the country's housing finance market. This initiative focuses on promoting growth within the Residential Mortgage-Backed Securities (RMBS) market, in collaboration with the Reserve Bank of India. The plan involves establishing a unique entity called RMBS Development Company Limited (RDCL), with NHB as the largest shareholder. Other prominent investors include a major insurance company, leading private banks, and several large Housing Finance Companies (HFCs), with Grihum Housing Finance Ltd (Grihum) being one of the initial shareholders, having approved an investment of up to INR 35 crores in RDCL.
The housing finance market in India, valued at approximately INR 30 lakh crores in FY23, is anticipated to double soon. This growth is expected to be driven significantly by the economically weaker sections (EWS), lower-income groups (LIG), and middle-income groups (MIG). This presents a lucrative opportunity for HFCs, particularly Affordable Housing Finance Companies (AHFCs), to expand their operations and cater to segments not served by mainstream lenders, thereby contributing to the government's objective of financial inclusion.
The Finance Minister predicts that the Indian economy will reach around USD 5 trillion by FY28. With growth in mortgage penetration expected, the housing sector will play a crucial role in driving economic growth and achieving the government's goal of making India the world's third-largest economy. NHB's initiative serves as a catalyst in transforming India's housing finance market. Its objectives include investing in RMBS, facilitating investment, issuance, and trade of RMBS, providing credit enhancement for RMBS transactions, and offering liquidity support in the secondary market for RMBS transactions. This collaborative effort among major financial institutions shows a shared commitment to creating a deep and vibrant RMBS market in India, enhancing liquidity, stability, and affordability in the housing finance market.
The Managing Director & Chief Executive Officer of Grihum, Manish Jaiswal, highlighted the importance of diversifying funding sources in the face of increasing demand for housing loans. He emphasized RMBS as a compelling solution to bridge the funding gap and sustain growth in the housing finance sector. RMBS not only offers a distinct funding profile to HFCs but also attracts capital from diverse investor groups such as insurance companies and retirement funds. NHB's initiative is expected to foster sustained expansion in the affordable housing market, strengthening the asset-liability management of HFCs and promoting financial inclusion.
NHB's initiative to promote the RMBS market in India signifies a strategic move towards addressing the growing demand for housing finance and supporting the country's economic growth objectives. By creating a conducive environment for RMBS transactions, this initiative aims to unlock new opportunities for investment, enhance liquidity, and drive affordability in the housing finance market.
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