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National Housing Bank Annual Lecture

(10 July 2017)

Bimal Jalan

Thank you, Mr. Kalyanaraman, for giving me this opportunity to deliver the National Housing Bank’s Annual Day Lecture to celebrate the 29th Foundation Day. The record of NHB in the past few years has been extremely significant and impressive in launching new programmes, and substantially expanding its financial assistance for rural as well as urban housing. As is well-known, NHB is a wholly owned subsidiary of Reserve Bank of India, and was set up in July 1988 under the National Housing Bank Act, 1987. Since then, both the government and the RBI policies have been highly supportive of housing finance through NHB, and providing concessions for housing particularly to low income groups – and also increasing the availability of land at below market rates for sections of urban population. All these measures have definitely given a major fillip to institutional housing finance, and contributed to expanding the scope of NHB’s role in this important sector.

It will be recalled that the high level group which recommended the setting up of NHB in 1987 envisaged broadly five main functions for NHB namely :

  • First, to promote new housing finance institutions (HFIs) – some with countrywide remit and some with local jurisdiction;
  • Second, to regulate the working of the housing finance institutions and coordinate their activities, as also those of other agencies in the housing field;
  • Third, to extend financial support to the housing finance institutions at the national/regional/local level including apex cooperative housing finance societies;
  • Fourth, to formulate policies relating to mobilization of resources and extension of credit for housing including creation of new instruments of savings linked to housing; and
  • Fifth, to play a facilitative role in identifying and removing various impediments – legal, fiscal, physical, technical, environmental, to the active involvement of the household sector in deploying their savings in housing.

In all the above five functions recommended by the High Level Group, NHB has contributed significantly to expansion and depth of housing finance in our country. NHB has been particularly responsive to quickly approving the establishment of new housing finance companies. In the past six months in 2017 itself, NHB approved three new housing finance companies. This is in addition to twelve approvals that were given in the previous 12 months. The infrastructure status awarded to affordable housing in this year’s Union Budget is likely to further support the supply side of low income housing and lead to a boom in affordable housing in the next few years. Thus, as compared with allocation of 6000 crores for rural housing between 2008-09 to 2013-14, during 2013-14 and 2016-17, funds allocated by NHB were more than four times i.e. nearly 33000 crores. In respect of urban housing also there was a four-fold increase in allocation of funds by NHB during 2013-14 to 2016-17. The rural housing fund and urban housing fund paved the way for financing over 20 lakh households in the target segments.

In this connection, it is also important to mention that in addition to housing finance through NHB, the government has also launched a new Pradhan Mantri Awas Yojana (PMAY) at the end of 2016. This initiative has considerably extended the benefit of Credit Linked Subsidy Scheme (CLSS) which is the key component of PMAY. NHB as Central Nodal Agency (CNA) has partnered with 174 Primary Lending Institutions to implement PMAY (Urban)-CLSS, under Housing for All by 2022 Mission of the Government of India.In Delhi, for example, the Delhi Development Authority which is the nodal agency for PMAY, has also decided to help people avail the benefit of the Credit Linked Subsidy Scheme (CLSS). Under the scheme, eligible allottees can avail of subsidy on interest. The benefit will range between Rs. 2.4 lakh and Rs. 2.7 lakh. But only those allottees can benefit from CLSS who meet the income status and other criteria of the scheme. Under this new scheme, by 2022, when India celebrates its 75 years of independence, a vast section of the poor would have been provided affordable housing with water facility, toilet facility and 24-hour electricity supply.

So, by and large, there is simply no doubt that under the guidance and help of NHB, supported by government and RBI, the expansion of housing finance in India in the past few years has been highly impressive. Let me take this opportunity to congratulate Mr. Kalyanaraman, Mr. Ashwani Tripathi and Mr. Rajan for achieving the tasks assigned to NHB under the 1987 Act in a most positive way.

While NHB’s record is most impressive, I should also mention that on the whole our country’s record in social sectors is not as good as it should be. As you are well aware, the most important measure of soci-economic programme among developing countries is a country’s rank in the Human Development Index (HDI) which is computed annually by the United Nations Development Programme (UNDP). The HDI is composite of three basic components of human development viz. Life Expectancy, Literacy and Standard of Living. It is believed to be a more comprehensive measure of progress of a country than per capita income or growth rate of GDP.  In the Human Development Report 2016, India’s HDI was 0.609, with a rank of 131 out of 188 countries. Though India is currently among the fastest growing economies in the world, its rank in terms of human development is still relatively low – lower than that of other BRIC countries. In its development agenda, over time, India is also committed to achieving the Sustainable Development Goals (SDGs), set by the UN, which attempt to address a comprehensive set of socio-economic goals, including the objective of making human settlements inclusive, safe, resilient and sustainable.

An important challenge for our country, in addition to further accelerating the availability of affordable housing finance, is to launch a comprehensive programme for achieving all the socio-economic goals set by the United Nations. Today, our country has the advantage of having a government in power constituted by a party which enjoys a majority of its own for the first time after 1989. Since 1989, until recently, we had as many as 9 governments with an average life of about 2 ½ years. Five of these had a tenure of 1 year or less with enormous powers to allocate resources, control public enterprises and decide interstate allocation of investments. Today, we have a government which is likely to be stable over its full term of five years. What is even more important is that it is fully accountable without any excuses or attribution of its failures to the so-called ‘compulsions of coalition politics’. By any standards, India’s domestic potential today is huge. India is a well-established democracy which grants full freedom to all its people to do what they wish and provides them with adequate powers to hold the government responsible. Today, we have also have full access to world-class technology and skills at comparatively low cost. As it happens, unlike the earlier period, at present our foreign exchange reserves are also sufficient to tackle any balance of payments pressures that might arise without having to seek assistance from abroad.

As it happens, currently India also has the advantage of being regarded as one of the fastest growing emerging countries, which has the resources to implement whatever measures it wishes to take for expanding the welfare of the people, particularly low income groups. As mentioned earlier, a number of reform measures have already been undertaken by the government to promote housing as well as other benefits to the poor. Some important measures recently taken by the government include inter-state Goods and Services Tax (GST), completion of existing public projects, such as in power sector and roads, and schemes like Jan Dhan Yojana. All these proposed economic reforms will certainly contribute to higher growth and hopefully reduce poverty. Ultimately, of course, the main task is to implement what has been promised.

As we look ahead, although much more needs to be done, I have no doubt that NHB’s growth prospects under the present leadership as well as support from government and RBI would, over time, certainly expand the availability of shelter and housing in all districts of India in the near future.

Let me stop here. Thank you.