Suraj wrote:In India, the loan risk is entirely in the hands of the bank issuing the loan, and therefore you have the 9-10% rates. Even the US would have much higher rates without the backstop and guarantee provided by GSE.
Not entirely true. You do have the NHB in India. But yes, the market is not as deep as the "Agency" securities in the US. But notice, that this entire US structure was controversial to say the least even before he 2008 meltdown and people were warning (including my B. School prof who was pretty vocal about it) the status of the "Not Sovereign " status of the the agencies, and the issue of picking up the credit risk of non sovereigns and the attendant consequences of the "agency mismatch" problem. All that was prescient and was shown up starkly in the 2008 crisis.
In addition the US RE market has huge homogeneity (atleast within areas), have far fewer "issues" (in terms of just legality of title and asset , and ownership thereof) , is very organised and hence amenable to securitisation.
In India, there are very few assets like that .Though you do and can securitise the lending portfolio of Housing Finance institutions .