National Housing Bank: The National Housing Bank i.e. NHB is planning to double the total refinance amount for the Affordable Housing Fund and Housing Finance Companies (HFCs) in the current financial year. In view of the growing demand for cheap and long-term loans, several large financial companies requested additional funds from the government and NHB. According to officials, the demand is being discussed and a decision may be approved soon. The move is being taken at a time when demand for home loans in the market is strong, but companies are facing constraints in raising funds.

If NHB expands the scope of the fund, it will provide a direct opportunity to housing finance companies to diversify their sources of credit. So far these companies have been largely dependent on commercial banks for their capital requirements. This initiative of NHB will not only reduce their dependence on banks, but they will also be able to get long-term loans at very low cost.

Credit limit of banks becomes a big hurdle

The biggest challenge facing housing finance companies is the internal credit limit of banks. In fact, commercial banks have a fixed internal limit for lending to NBFCs and housing finance companies which they cannot cross. When a bank reaches this exposure limit, it becomes extremely difficult for companies to raise new loans from banks despite strong demand for home loans.

Regarding the issue, a senior official of a leading mortgage lender clarified that banks have set limits for lending to HFCs. For this reason, raising new funds becomes a difficult task even amid strong demand for home loans. For this reason the companies approached the NHB and the Finance Ministry. Companies say that refinancing from NHB is not only cheaper, but also gives them an open space to expand their business without being overly dependent on banks.

Cheap funds, full calculation of interest rates

The biggest feature of funds from NHB is its very affordable interest rates. According to officials, the interest rate for normal refinancing of NHB is around 7.65 percent. At the same time, the loan rate available under the Affordable Housing Fund is only around 4.25 percent. If these two rates are compared with loans from commercial banks, NHB funds prove to be much cheaper for companies.

Because of this huge difference in costs, it is estimated that NHB may reach 30 to 35 percent of the total borrowings of some major housing companies this year. Last year this figure was in the range of 20 to 25 percent. If we look at the figures, this government-owned development financial institution during the year ended June 2025 generated Rs. 32,308 crore disbursed refinance. Last year this disbursement was Rs. 32,085 crores. Out of this total, the disbursement of the Affordable Housing Fund was recorded at Rs 5,791 crore.

Which companies will benefit?

This proposed decision of NHB will directly benefit many prominent housing finance companies of the country. According to officials, the list includes majors like LIC Housing Finance, Bajaj Housing Finance, PNB Housing Finance, Aadhaar Housing Finance and TrueHome Finance. These companies are constantly looking for cheap funds to grow their loan portfolios.

NHB has a very strong financial standing and a ‘Triple A’ (AAA) credit rating. This institution provides refinancing against eligible housing loans given by lenders, thereby providing companies with secure funding for the long term. Apart from this, NHB is also working on affordable and green housing programs in collaboration with various international development agencies. Officials say the special fund available for green housing and houses built in backward areas is about 30 basis points cheaper than normal NHB refinance. These concessions encourage companies to reach out to remote areas.

Banks are the largest source of funding for housing companies

Banks are currently the largest source of funding for housing companies, although companies are looking for alternatives. While the share of mutual funds and insurance companies has declined in recent times, the share of banks has been steadily increasing. According to Reserve Bank of India’s June 2026 Financial Stability Report, the total liability of housing companies to the financial system by March 2026 is Rs. 7.35 lakh crore, while their receipts were only Rs. 0.19 lakh crore was.

On the other hand, NHB data shows that by the end of July 2026, housing finance companies have Rs. 7.44 lakh crore of personal home loans outstanding. This figure is Rs. 40.07 lakh crore is 18.6 percent of the total home loan market. In addition to HFCs, the entire market includes government banks, private banks and regional rural banks. Until a year ago, the share of housing companies in this market was 18.3 percent. In such a situation, the huge funding provided by NHB will help these companies expand their loan books faster without over-reliance on banks.