The National Housing Bank (NHB) has plans to come with a mechanism under which it proposes to buy home loans from banks and housing finance companies (HFCs) to make available, liquidity and free up capital to these lenders.

NHB will securitise loan portfolios and sell the papers to institutional investors such as banks and insurance companies.

This mechanism if operational can be expected to ease the pressure on housing loan interest rates.

Under the proposed mechanism- NHB will hold the purchased assets in its balance sheet for onward securitisation. This means that NHB will become something akin to a warehouse of mortgage assets to be securitised and then sold to investors without reducing the standard of the assets.

NHB came up with this scheme after a meeting between the high-ranking officials of NHB brass and lenders. NHB is set to offer this facility along with the option of refinance.

Based on preliminary discussions, NHB will buy out only those standard assets which have a low risk weightage. Loans up to Rs 30 lakh will qualify for this arrangement.