Chennai, Apr 18: National Housing Bank is in the process of setting up a mortgage guarantee company in association with some foreign housing finance firms with a view to encourage housing loans for the "non-salary informal class of the society". "The non-formal sector, which is a major chunk of the Indian housing loan market, has not yet been seriously addressed by banks or housing finance companies due to the gravity of the risks involved compared to the salaried sector," V Sridar, chairman and managing director, NHB, said here today.

Speaking at the inauguration of the corporate office of the Repco Home Finance Company, a subsidiary of the public sector Repco Bank, he said the company was expected to be formed by the end of this year and would become operational early next year.
NHB was also planning more initiatives in the direction of securitisation of housing loan with a view to creating a secondary market for housing loans as a product. For this, a lot of standardisation and application of technology had to take place.
On the drastic reduction in interest rates for housing loans and aggressive competition by banks and housing finance companies who even extend 110 per cent loans, he said such enthusiasm needs to be restrained as there was every likelihood of the interest galloping after some time, leading to bad business and mounting NPAs. Bureau Report