NHB to give part-guarantee for bonds floated by HFCs
In what could be a big boost for mortgages, the National Housing Bank (NHB) would provide part-guarantee for bonds floated by housing finance companies, potentially lowering the cost of funding by a minimum 45 basis points and providing home buyers sufficient incentive to borrow.
The NHB would also help mortgage lenders take on commercial banks that have definitive regulatory advantage in accessing chapter funds.
The regulator for housing finance companies has decided to part guarantee bond sales if half of the total proceeds are used to fund purchases of homes costing up to Rs 50 lakh, three people with direct knowledge of the matter told ET. For metros like Delhi, Kolkata, Mumbai, Hyderabad, Bengaluru and Chennai, the threshold is about Rs 65 lakh.
If a housing finance company, with the minimum investment grade rating (BBB-), sells bonds through the electronic bidding platform on stock exchanges, NHB will guarantee 30 per cent of such bonds. “The NHB guarantee will help improve ratings of housing finance companies,” Sriram Kalyanraman, MD of NHB told ET. “Such companies will be able to bring down borrowing costs, which would be passed on to customers,” he said. A study by NHB shows the cost benefit to be in the range of 45-65 basis points, sources said. For example, if a customer avails a Rs 20 lakh home loan for 15 years at 10 per cent from a non-banking finance company, he has to fork out Rs 21,492 as equated monthly installments. A half percentage point (50 basis points) reduction in rates will bring down his monthly outgo by about 3 per cent to Rs 20,885.