Provision: The National Housing Bank (NHB) is the apex regulatory body that regulates housing finance companies in India. It operates under the jurisdiction of the Union Ministry of Finance.  

About NHB: National Housing Bank 

• NHB Full Form: National Housing Bank
• Mandate: NHB has been given a mandate of operating as a principal agency for promoting housing finance institutions both at local and regional levels and to provide financial and other services to such institutions.
  • In this goal of regulating the housing finance sector, It registers and supervises Housing Finance Companies (HFCs), maintains surveillance through On-site and off-site Mechanisms, and coordinates with other Regulators.
• Setting Up: The Sub-Group on Housing Finance for the Seventh Five Year Plan (1985–90) had identified the non-availability of long-term finance to individual households as a major roadblock for the progress of the housing sector. 
  • As a response, a High-Level Group under the Chairmanship of Dr. C. Rangarajan was set up to examine the proposal of setting up the National Housing Bank as an autonomous housing finance institution. 
  • The National Housing Bank (NHB) was set up on 9 July 1988 under the National Housing Bank Act, 1987.

NHB: Its Objectives

The NHB has been set up with the following objectives:

• Promoting a viable and cost-effective housing finance system to cater to all segments of the population and to integrate the housing finance system with the overall financial system.
• Promoting a pool of dedicated housing finance institutions to adequately serve the needs of various regions and different income groups.
• Regulating the activities of housing finance companies based on existing regulatory and supervisory authority derived under the Act.
• Augmenting existing resources for the housing sector.
• Making housing credit more affordable for the people.
• Providing support and aid for housing finance institutions.
• Augmenting the supply of buildable land and also building materials for the housing sector and upgrading the housing stock in the country.
• Encouraging public authorities to emerge as facilitators and suppliers of serviced land, for housing.

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NHB: Its Structure 

• Governance: The general superintendence, direction, and management of the affairs and business of NHB under the Act vests in a board of directors. 
• Regulation: The Finance Act, 2019 has amended the National Housing Bank Act, 1987 to confer the powers of regulation of Housing Finance Companies (HFCs) to the Reserve Bank of India (RBI).

NHB: Its Functions

• Supervising Housing Companies: The National Housing Bank (NHB) has the role of supervising housing companies in the country following the Act.
• Lending Loans: It extends housing loans to individuals and housing infrastructure companies.
• Registering Housing Finance Companies: The NHB has the role of registering Housing Finance Companies in the country.
• Refinancing: It raises Funds from the market and uses it for refinancing the housing finance companies along with cooperative banks.
• Follow Regulatory Rules: It ensures that housing finance companies under the Act follow the regulatory capital required as outlined in BASEL guidelines.
• Auditing Housing Companies: The NHB is tasked with auditing housing finance companies, ensuring their compliance with the relevant guidelines.

NHB: Its Significance

• Regulates Housing Finance Sector: NHB ensures the regulation and oversight of all housing finance companies operating throughout India.
• Liquidity for the Housing Sector: It ensures a continuous flow of liquidity to various finance institutes working in the housing sector.
• Boosting the Housing Sector: It is also tasked with boosting the housing sector by increasing the number of housing units in the country.

National Housing Bank – RESIDEX

• About: Based on the directives of the Union Ministry of Finance, India’s first official housing price index, National Housing Bank-RESIDEX was created by the National Housing Bank.
• Development: The National Housing Bank-RESIDEX was created based on the assistance of the Technical Advisory Committee, consisting of all stakeholders.
• Objective: The objective of National Housing Bank-RESIDEX is to track changes in housing prices at neighborhood, city, and national levels. 
  • Price changes will be tracked over time and across cities and various locations within cities. 
• Calculation: Initially calculated using market data, it is now based on valuation data obtained from housing finance companies (HFCs) and banks.
  • Between 2013 and 2015, data was sourced from the Central Registry of Securitization Asset Reconstruction and Security Interest of India (CERSAI).
• New Changes: To make National Housing Bank-RESIDEX more current and up-to-date with the prevailing situation, NHB carried out a review of the processes and methodology used for computation of the index along with the base year and segmentation used.
  • National Housing Bank-RESIDEX has been expanded to include housing price indices (HPI), land price indices (LPI) building materials price indices (BMPI), and also housing rental index (HRI).
• Significance:
  • Using current trends in micro as well as macro markets, National Housing Bank-RESIDEX will predict future behavior of the housing market.
  • The index will help banks, HFCs, developers, and home-buyers to identify property prices.
  • The index will be useful for credit evaluation processes undertaken by lenders. This will ensure stronger safeguards against financial lending.
  • It can help policy makers and various research institutions to track inflation/deflation in housing prices. 
    • Policy makers can use the data to develop models for more effective revenue collection, and to design affordable housing schemes.

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Conclusion:

The National Housing Bank (NHB) is a self-governing body that meets the financing needs of housing finance companies by either fundraising for onward refinancing or through guarantees.