The active role of National Housing Board in real estate developments

The National Housing Board (NHB) support for real estate development in Kerala is subject to the state government meeting certain guidelines.  The Housing Finance Corporation (HFC) should be a public limited company formed with the main objective of carrying on the business by providing long-term finance for construction or purchase of houses for residential purposes. 
 
The Corporation should be involved only in financial activities and 75 percent of its lending should be by way of loans for housing.  It should have a minimum paid-up capital of Rs. 1 crore and there should be at least 30 percent promoters’ contribution and 20 percent equity participation by a scheduled bank or a public financial institution or the state government or a government approved HFC.  Alternatively the promoters’ contribution should not be less than 50 percent.  In Kerala Real Estate developments have got accelerated in recent times due to the innovative approach of the NHB.
 
The NHB norms further stipulate that the total external borrowing through deposits, issue of debentures, bonds, loans and advances from banks, financial institutions and other institutions, but excluding any loan from NHB, should not exceed 10 to 15 times the owned funds with the corporation, like the paid-up capital, free reserves, less deferred revenue expenditure and intangible assets.  So far only a few HFCs in private sector have been approved by the NHB for refinancing facilities. 
 
Looking to the present critical housing situation in the state the NHB should adopt a more flexible approach and accelerate the process of recognition of HFCs for refinancing activities.  Some relaxation in the guidelines laid down by NHB is also necessary so that HFCs are not denied financial support from the NHB merely because of non-observance of a certain guideline.  In particular, the minimum requirement of Rs. 1 crore of paid-up capital must be reduced to Rs.50 lakh.