India’s housing finance market, valued at around Rs 30 lakh crores in FY23, is expected to double up in next 5 years. With the demand for housing loans reaching unprecedented levels, the traditional avenues of funding may face inherent limitations.
In a strategic move to further propel the housing finance market, RMBS Development Company Limited (RDCL), has been established by the National Housing Bank (NHB) in consultation with Reserve Bank of India.
The move is focussed on promoting growth within the Residential Mortgage-Backed Securities (RMBS) market.
In RDCL, NHB is the single largest shareholder, along with other marquee investors including one of India’s largest Insurance Company, couple of leading private banks and few other large HFCs.
What is RMBS, and its scope of growth in India?
Residential mortgage-backed securities (RMBS) are debt-based securities (assets) collateralised by a mortgage or a collection (pool) of mortgages.
The underlying assets can include, but are not limited to, conventional mortgage loans, green mortgage loans, and affordable mortgage loans.
As the housing finance sector anticipates a surge in financial requirements to meet the burgeoning housing demand, there arises a crucial need for diversification in funding sources.
To bridge this demand gap in the coming years and propel sustained growth in the housing finance sector, RMBS emerges as a compelling solution which shall strengthen the ALM of the HFCs. RMBS not only provides a distinct funding profile to HFCs but also unlocks additional capital from diverse investor groups including Insurance companies, retirement funds, etc.
Key stakeholders in the RDCL
In this initiative, Grihum Housing Finance Ltd would also be amongst the initial shareholders as the board of directors of Grihum have approved an investment in the equity share capital of RDCL of upto Rs 35 crores. RDCL is expected to be incorporated soon and initialize its operations in FY25.
Speaking on the development, Manish Jaiswal, Managing Director & Chief Executive Officer of Grihum said, “With the demand for housing loans reaching unprecedented levels, the traditional avenues of funding may face inherent limitations. RMBS emerges as a compelling solution which shall strengthen the ALM of the HFCs. RMBS not only provides a distinct funding profile to HFCs but also unlocks additional capital from diverse investor groups including Insurance companies, retirement funds, etc. NHB, with this exemplary initiative, will foster a sustained expansion in the dynamic and evolving affordable housing market.”
According to sources, the National Housing Bank is setting up securitisation intermediary RMBS Development Company Limited along with LIC, HDFC bank ICICI bank, Bajaj Finance, Grihum Housing Finance, Tata Housing, Hero Housing, Shriram Housing, IIFL Housing, Aditya Birla Housing, to promote and develop RMBS market in the country.
