The Rs 100-crore modest issue is expected to rewrite the rules of housing finance business in the country and provide an alternative investment product in the otherwise under developed secondary mortgage market in the country and attract foreign investment in the cash starved housing sector.

The NHB will initially involve issues from four housing finance companies. The Housing Development Finance Company (HDFC), LIC Housing Finance, Can Fin Home and Dewan Housing.

"The securitised debt would have a maturity period of five to seven years. The whole mechanism would work in such a way that a pool of mortgaged assets would be sold by the housing finance companies to NHB which would in turn introduce a special purpose vehicle (SPV) and offer it to investors as pass-through certificates"NHB chairman and managing director PP Vora said.

The pass-through certificate provides an yield ranging between 1.5 to 2 per cent as spread and another 0.5 per cent will be charged as processing fee from the earnings on the loans having a maturity period of 10 years on which housing finance companies would earn about 16 per cent returns, he added.

Over a period of time, the spread will be passed back to the concerned housing finance companies either in the shape of premium at purchase of the mortgage or as service charges, he said.

The new initiative is aimed at developing a secondary mortgage market and allow banks to deal in property transactions smoothening the process for average consumer forming bulk of the market.

Earlier, addressing newspersons, NHB executive director PK Handa said the bank also plans to raise raise Rs 750 throguh private placement of bonds during the current financial year begining July having a maturity period of seven years. The coupon rate will be decided by the prevailinginterest rates in the market.

The NHB has disbursed an aggregate financial assistance of Rs 774.25 crore during 1998-99 as against Rs 475.18 crore last year.

The cumulative financial assitance extended by the NHB till the end of June 1999 amounted to Rs 4421.91 crore registering a growth of 45 per cent in its lending operations.

Of the cumulative refinace assistance 77.7 per cent has gone to housing finance companies, 16.9 per cent to cooperative sector institutions and 5.4 per cent ot the banking sector.

The NHB has achived a profit of Rs 58 crore during the year ending June 30 as against Rs 53.18 crore last year, Handa said.