NHB to raise 2100 crore through Tax free bonds

Boosted with the standard set by its private placement programme, NHB (National Housing Bank) has stepped forward with a retail offering of tax-free bonds, to be raised by next month.

The country’s housing finance regulator-NHB, has given its confirmation that it will raise Rs 2100 crore in retail tax free bonds in the following month, as more and more investors aim to get off the hook and save tax before the financial year 2013-14 comes to an end. According to government officials, the NHB will be allowed to scare up Rs 3000 crore from tax-free bonds in this fiscal year, 70% of which will be assigned to retail investors.

The need for such money

According to market sources, the money raised will play a pivotal role in funding retail housing. The said money will find its relevance in low-income housing programme of the government for the economically weaker sections of the society. In addition to it, the programme will also have a dab hand in refinancing mortgage loans for individuals belonging to lower-income group.Such borrowing will be assured by the government.

The housing finance regulator will also use the fund to support the developers and builders who have undertaken low-cost housing projects. Government officials further corroborated the fact that the funds will help the low-income households in the form of credit to HFCs-housing finance companies, on the pretext that the money is utilized only for construction of affordable houses.

Economically weaker sections

Raising of such volume of money has become a mandate in the country since, there is a shortage of around 19.78 millions housing units, 95% of which fall under economically weaker sections and lower income group.

Since most of the land have been consumed due to construction of metro in prime cities, developers agree to step in for low-income housing projects only if there is a feasible business model that has the consent of both the real estate community and government.

The economically weaker sections, under the refinance scheme, are entitled to a 15-year loan from housing finance companies, if their annual income stands at Rs 2 lakh. The scheme will facilitate acquiring of loan at a concessional fixed interest rate and buying houses valuing Rs nearly Rs 10 lakh.