(By R V Verma)



As chairman and managing director of National Housing Bank (NHB) since September 2010, R V Verma has been at the forefront of bringing transparency into the housing finance market. With a Masters in Economics from the Delhi School of Economics, he began his career with the Reserve Bank of India. Having been with the housing finance regulator since its inception in 1987, Verma has been instrumental in leading policy initiatives such as developing mortgage mechanism and creating affordable housing. In an interview with Sankalp Saini, Verma shares his thoughts on the current status of India’s housing finance market, NHB’s role as a regulator and the road ahead.

National Housing Bank this year is celebrating 25 years of operations. How’s been the journey so far and what role do you envisage it playing over the next few years?

The last 24 years have been very interesting and also challenging. We have been through different phases of sectoral dynamics, both in housing finance as well as in the financial markets. We have tried to bridge the gap between the financial sector and the construction sector. We have seen the sector becoming more and more consumer and borrower driven. So we have engaged more seriously and actively with the lending community. Now, through financial sector instruments and institutions, we should be addressing the gaps in the construction sector. Regulation is on the anvil that can induce discipline in the industry but apart from that it is more important that we have financial sector instruments such as ratings which can lay down certain contours for the construction industry to engage in. Our next destination is certainly going to be the real estate sector which would involve financing of projects or affordable technology, innovative construction methods etc.

How do you plan to fill the gaps in the construction industry? Are those gaps in terms of transparency and regulatory issues?

Pricing and customer satisfaction are two of the important issues that need adequate focus. Unless there is transparency in information and availability of right kind of information to the customers, the market becomes very opaque. An opaque market does not function efficiently. This leads to scepticism in the minds of buyers and raises the risk perception among lenders, which can ultimately impact pricing of realty projects. Eventually, we are looking at a more transparent construction industry. The other issue is on the timelines given by developers for completion of projects. There is a great deal of uncertainty in terms of completion dates of many housing projects. This is a very serious gap which impacts not only the efficiency of the realty market but also that of various lending institutions. I believe market forces in a large measure will resolve all these gaps.

Regarding transparency issues, is NHB planning to frame guidelines on rating of housing projects?

We are in close consultations with both Ministry of Finance and Reserve Bank of India on how we can use the rating as an instrument for disciplining the construction industry. This is being done in the larger interests of consumers and buyers. During the course of the current fiscal, we hope to have some kind of a mechanism in place for rating of housing projects.

The 2012-13 Budget allows NHB to launch tax-free infrastructure bonds. When are you planning to launch the first tranche of these bonds?

We have to get more clarity from the government on this. We can fix a timeframe for launching the bond issue only after it has been notified by the finance ministry.