Date:02/03/2005 URL: http://www.thehindubusinessline.com/2005/03/02/stories/2005030203110600.htm

Back 'Boost to residential mortgages'

Our Bureau

New Delhi , March 1

THE National Housing Bank (NHB) has welcomed the Budget proposal to widen the definition of `securities' under the Securities Contracts (Regulation) Act, 1956 to include securitised mortgage debt.

"The move would have tremendous positive impact on development of the secondary market for residential mortgages in the country," Mr P.K. Gupta, CMD, NHB, said.

NHB has been undertaking activities pertaining to securitisation of housing loans originated by HFCs and banks to channelise funds into housing sector. In the process, NHB purchases residential mortgages from the HFCs and banks, and issues Residential Mortgage Backed Securities (or securitised mortgage debt) (RMBS) to the investors in the capital markets.

"The experiences and trends of housing finance businesses in developed markets and in other emerging economies indicate that a liquid secondary mortgage market is essential to supplement the growth of primary mortgage lending," Mr Gupta said.

He pointed out that the major benefits of the present move would be by making the residential MBS tradable, it would provide an exit route for investors.

It would also enthuse pension funds, provident funds and superannuation funds.