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Nhb Drops Sbi Home Fin, Dewan From Pilot Issue

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Abhinaba Das BSCAL
Last Updated : Apr 08 1997 | 12:00 AM IST

Move to securitise housing loans

The National Housing Bank (NHB) has decided to leave out SBI Home Finance and Dewan Housing from the consortium of housing finance companies participating in RBIs pilot issue of debt securitisation.

The decision will reduce the number of participants in the consortium to only three - HDFC, LIC Housing and Canfin Homes - who will each receive over Rs 30 crore through the novel instrument from securitising their debts.

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According to a source, the pilot issue designed to raise Rs 100 crore, which has already been delayed due to legal hitches, is likely during the middle of the current fiscal. The issue has been designed to test the waters and its success will augur well for the resource mobilisation plans of large housing finance companies, the source said. Securitisation of housing loans is a relatively new concept in India.

HDFC, the country's largest housing finance company, is planning to tap this market on its own during the current fiscal. Over $500 billion is raised globally through securitisation of debts.

The decision to leave out SBI Housing Finance and Dewan Housing will leave larger funds at the disposal of the consortium members, who as per the earlier plans were likely to draw Rs 25 crore from the issue proceeds. Now the three housing finance companies will receive Rs 33 crore each through the issue.

Under this fund raising mechanism, housing finance companies split the mortgages into smaller units for trading in the secondary markets, which in turn improves liquidity in the industry in general. The main reason why debt securitisation has till now failed to take off is the absence of a mature secondary debt market, said a merchant banker, t

"Unless there is an active secondary market for trading in debts, not many investors will be interested in such instruments," a senior official of a rating agency said.

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First Published: Apr 08 1997 | 12:00 AM IST

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