National Housing Bank (NHB) was set up on 9 July 1988 under the National Housing Bank Act of 1987. It is the apex financial institution for housing. NHB has been established with an objective to operate as a principal agency to promote housing finance institutions, both at local and regional levels, and to provide financial and other assistance to such institutions. NHB comes under the jurisdiction of the Union Ministry of Finance, and the Government of India entirely owns it.
Overview of National Housing Bank
| Established | 9 July 1988 |
| Type | Regulatory Body |
| Industry | Housing Finance Companies |
| Headquarters | New Delhi, India |
| Owner | Ministry of Finance, Government of India |
Background
The Sub-Group on Housing Finance for the 7th Five-Year Plan (1985-90) identified the non-availability of long-term finance to individual households on any significant scale as a major gap hindering the progress of the housing sector and recommended the establishment of a national-level institution.
The Committee of Secretaries considered the recommendation and set up the High-Level Group under the chairmanship of Dr C. Rangarajan, the then Deputy Governor of RBI, to examine the proposal. The “C. Rangarajan Committee” recommended the establishment of the National Housing Bank as an autonomous housing finance institution. The Government of India accepted the recommendations of this High-Level Group.
On 28 February 1987, while presenting the Union Budget for 1987-88, the then Prime Minister of India announced the decision to set up the National Housing Bank (NHB) as an apex-level institution for housing finance. The Indian Parliament passed the National Housing Bank Act on 23 December 1987, which provided a legislative framework for setting up NHB.
About NHB
The National Housing Bank (NHB) was established on 9 July 1988 under the National Housing Bank Act 1987, with an initial capital of INR 100 crore. The general supervision, direction, and management of the affairs and business of NHB vest in a Board of Directors under this 1987 Act.
Reserve Bank of India (RBI) is the parent organisation of NHB, as it contributed the entire paid-up capital. NHB remained an integral part of the Reserve Bank of India till 2019. The Government of India took over the NHB from RBI in 2019 after purchasing the entire stake for INR 1,450 crores. This step by the Union is in response to the recommendations of the Narasimha-II Committee Report of 2001.
The Finance Act 2019 has amended the National Housing Bank Act of 1987. This amendment confers the powers of regulation of Housing Finance Companies (HFCs) to the Reserve Bank of India.
While the regulation of HFCs is with the RBI, the NHB registers and supervises HFCs, keeps surveillance through on-site and off-site mechanisms and coordinates with other Regulators.
Vision – NHB
“Promoting inclusive expansion with stability in housing finance market”.
Mission – NHB
“To harness and promote the market potentials to serve the housing needs of all Segments of the population with the focus on low and moderate-income housing”.
Organisation
National Housing Bank is a lean, officer-oriented, professionally management institution with its headquarters in New Delhi. Its regional offices are in Ahmedabad, Bengaluru, Bhopal, Chennai, Guwahati, Hyderabad, Kolkata, Guwahati, and Mumbai. NHB is devoted to pursuit of excellence through innovations, doer-work culture and contemporary work practices with technology intervention.
Objectives of NHB
- To promote a sound, healthy, viable and cost-effective housing finance system to cater for all segments of the population and to integrate the Housing Finance system with the Overall Financial system.
- To augment resources for the sector and channelise them for housing.
- To promote a network of dedicated housing finance institutions to serve various regions and different income groups adequately.
- To make housing credit more affordable.
- To supervise the activities of housing finance companies based on supervisory power derived under the Act.
- To encourage augmentation of the supply of buildable land and building materials for housing and to upgrade the housing stock in the country.
- To encourage public agencies to emerge as facilitators and suppliers of serviced land for housing.
Functions of NHB
- The primary function of NHB is the supervision of the Housing Finance Companies (HFCs), keeps surveillance through on-site & off-site mechanisms and coordinates with other regulators. It is also responsible for registering Housing Finance Companies (HFCs).
- Its other function is grievance redressal regarding HFCs in the country as per the National Housing Bank Act 1987.
- The NHB raises funds on a large scale and refinances the HFCs along with cooperative banks. These housing agencies further lend housing loans to individuals and housing infrastructure companies.
- The NHB ensures that all the Housing Finance Companies under the 1987 Act follow the regulatory capital requirements outlined in BASEL guidelines.
NHB RESIDEX
In July 2007, the National Housing Bank (NHB) created the NHB RESIDEX, India’s first official housing price index, an initiative by the NHB in response to the directives of the Ministry of Finance, Government of India. The index was developed under the guidance of the Technical Advisory Committee (TAC), comprised of housing stakeholders.
Initially, NHB RESIDEX was calculated using obtained market data. But from 2010 onwards, it followed the valuation data obtained from various Housing Finance Companies (HFCs) and other housing institutions.
Since its inception in 2007, NHB RESIDEX went through updates on a regular basis until March 2015, taking the year 2007 as the base year. In these years, the NHB RESIDEX expanded gradually to cover 26 cities present in the country.
The NHB undertook a review of the processes used for the computation of the index, along with the base year, in order to make RESIDEX more current and updated with the prevailing macroeconomics scenario. With effect from April 2018, a new series of the NHB RESIDEX has been published with the fiscal year 2017-18 as the new base year.
NHB RESIDEX enables the housing finance companies, banks, policymakers, builders, developers, investors, individuals, etc., to track the movement of housing prices across different cities in India on a quarterly basis.