‘Our products will enable early home ownership with a lower down payment’

The India Mortgage Guarantee Corporation (IMGC) is a first-of-a kind entity set up in the country. Its primary function would be to offer mortgage guarantees on housing loans. Amitava Mehra, the CEO of IMGC in an interview to L Ramakrishnan says that in the years to come, the aspiring home owner will be able to buy a home earlier and with significantly lower down payments. Excerpts:

What is a mortgage guarantee company and why is there a need for it in India?

A mortgage guarantee company is a non-banking financial company formed under the Mortgage Guarantee Company (Reserve Bank) Guidelines, 2008. A mortgage guarantee company's primary business shall be to offer mortgage guarantees against borrower defaults on housing loans from mortgage lenders.

The residential mortgage industry is an important pillar for economic growth of the country. Mortgage guarantee will be able to add significant value to the Indian mortgage sector over the long term through efficient use of capital, risk transfer and risk mitigation, which will also translate to early home ownership for first time home buyers and help expand access to housing in India.

What is the role of the IMGC? What is its structure? How will it function?

IMGC will provide credit guarantees to banks and housing finance companies on behalf of the borrowers. The lending institutions, having taken guarantee cover from a mortgage guarantee company, can benefit from capital relief against such guaranteed loans through lower risk weights.

IMGC has been registered by the Reserve Bank of India (RBI) as the first mortgage guarantee company in India. The company is a joint venture between the National Housing Bank (NHB), Genworth, Asian Development Bank (ADB), and International Finance Corporation (IFC), a member of the World Bank Group. NHB has a shareholding of 38 per cent of IMGC, Genworth has a stake of 36 per cent, while ADB and IFC, have a 13 per cent stake each in the joint venture company.

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