Sebi may allow MFs to invest in housing loan secs

With the government deciding to amend the National Housing Bank (NHB) Act, an effective foreclosure norms would be in place in the country. This would allow housing finance companies to sell the mortgaged property without embroiling itself in legalities to recover defaulted loans.

Chairman and managing director of NHB, P P Vora said that the bank has moved a proposal with SEBI regarding mutual funds investment in housing loan securities.

Making a strong case for allowing mutual funds to invest in housing loan securities, he said there was a recovery rate of over 96 per cent by housing finance companies. Once allowed, mutual funds which are planning to come out with real estate funds, could invest in the product.

"We would definitely welcome such a step by SEBI," Anil Sehgal, vice-president of Canada-based Dundee Mutual Fund said. Dundee Mutual Fund is one of the few funds that have plans to launch a real estate fund in India.

Housing loan securities would be treated as a debt product commanding a fixed rate of interest with a minimum tenure of seven years. There are 29 housing finance companies registered with National Housing Bank (NHB) with a loan portfolio of Rs 22,000 crore, which is growing at a rate of 30 per cent per annum.