National Housing Bank (NHB)

The National Housing Bank (NHB) is the apex financial institution in India responsible for promoting, regulating, and refinancing housing finance institutions. It was established with the primary objective of encouraging housing finance and ensuring the development of a sound, stable, and efficient housing finance system across the country. The NHB plays a pivotal role in supporting both public and private housing finance companies and contributes significantly to the implementation of national housing policies.

Establishment and Background

The National Housing Bank was established on 9 July 1988 under the National Housing Bank Act, 1987, which was passed by the Indian Parliament. The creation of NHB was based on the recommendations of the Committee on Housing Finance chaired by Dr. C. Rangarajan, which recognised the need for a specialised financial institution to cater to the growing demand for housing finance.
Initially, the NHB was wholly owned by the Reserve Bank of India (RBI), which provided the institution with strong regulatory and financial support. However, in 2019, the ownership was transferred from the RBI to the Government of India, specifically under the Ministry of Finance, to strengthen coordination between housing finance and the broader economic policy framework.

Objectives and Mandate

The National Housing Bank was created with a multifaceted mandate aimed at promoting housing finance institutions and ensuring accessible housing finance for all income groups. Its key objectives include:

• Promotion and Development: To promote housing finance institutions and support the expansion of housing finance systems to all parts of India.
• Regulation: To regulate the activities of housing finance companies (HFCs) to ensure financial stability and consumer protection.
• Refinance and Support: To provide refinance facilities to banks, housing finance companies, and other approved institutions engaged in housing finance.
• Resource Mobilisation: To encourage the flow of resources into the housing sector through innovative financial instruments.
• Affordable Housing: To support housing for economically weaker sections (EWS) and low-income groups (LIG) through policy and refinance assistance.

Organisational Structure

The NHB functions as an autonomous statutory body under the administrative control of the Department of Financial Services, Ministry of Finance. Its governing structure includes:

• A Chairman and Managing Director (CMD) appointed by the Government of India.
• Representatives from the Ministry of Finance, the Reserve Bank of India, and other financial experts.The headquarters of NHB is located in New Delhi, with regional offices across major Indian cities to coordinate its operations and outreach activities.

Functions of the National Housing Bank

The NHB performs several important functions that support the housing and financial sectors of India. These can be broadly classified as follows:

1. Promotional Functions:
   • Encouraging housing finance institutions and strengthening the housing finance infrastructure.
   • Supporting the development of rural and urban housing projects.
   • Conducting research and policy studies related to housing finance and affordability.
2. Refinance Operations:
   • Providing refinance facilities to banks, cooperative institutions, and housing finance companies to expand their lending capacity.
   • Offering long-term funds for housing projects, particularly in affordable housing segments.
   • Supporting specialised schemes such as the Golden Jubilee Rural Housing Finance Scheme and Credit Linked Subsidy Schemes under Pradhan Mantri Awas Yojana (PMAY).
3. Regulatory Role:
   • Acting as a regulator for housing finance companies (until 2019, after which this function was transferred to the RBI).
   • Ensuring financial soundness, fair practices, and consumer protection in the housing finance industry.
   • Promoting transparency and uniformity in housing finance operations.
4. Financial and Advisory Support:
   • Assisting government and private institutions in designing housing finance programmes.
   • Providing technical and financial consultancy services for housing development and urban planning.
   • Encouraging the use of modern construction technologies and environmentally sustainable housing solutions.

Role in Affordable Housing

A major focus area of the NHB has been to facilitate affordable housing for economically weaker and low-income households. Through its refinance schemes, the NHB provides liquidity support to lenders that extend credit to these segments. It plays a key role in implementing various government initiatives, including:

• Pradhan Mantri Awas Yojana (PMAY): NHB acts as a central nodal agency for the Credit Linked Subsidy Scheme (CLSS), which provides interest subsidies to eligible homebuyers.
• Refinance Schemes for Rural Housing: Targeted schemes aim to support cooperative banks and regional rural banks to increase housing credit in rural areas.
• Sustainable and Green Housing Initiatives: NHB promotes environmentally responsible housing and encourages the use of energy-efficient technologies in construction.

Financial Instruments and Operations

To mobilise resources and support housing finance, NHB employs various financial instruments such as:

• Bonds and debentures issued in the domestic and international markets.
• Lines of credit from multilateral institutions such as the World Bank, Asian Development Bank, and KfW Bank.
• Refinance assistance to banks and housing finance companies at concessional rates.
• Funding for housing microfinance institutions serving small borrowers.

These operations strengthen the housing finance ecosystem by ensuring consistent liquidity and affordable lending rates for both institutions and end-users.

Developmental and Research Initiatives

Beyond finance, NHB also engages in research, capacity building, and knowledge dissemination related to the housing sector. It publishes the Report on Trends and Progress of Housing in India, conducts training programmes for housing finance professionals, and develops housing price indices such as the NHB RESIDEX, which tracks residential property prices across Indian cities.
The NHB has also been instrumental in promoting credit risk management, mortgage-backed securitisation, and standardisation of housing finance documentation.

Challenges

Despite its achievements, the National Housing Bank faces certain challenges:

• High Urban Housing Demand: Rapid urbanisation has created a large gap between housing demand and supply.
• Affordability Issues: Rising property prices often make housing unaffordable for lower and middle-income groups.
• Limited Penetration in Rural Areas: Rural housing finance remains underdeveloped due to low income levels and inadequate collateral.
• Non-performing Assets (NPAs): Housing finance companies occasionally face asset quality issues, particularly in economically weaker segments.