The Reserve Bank of India has defined the ‘Housing Finance’ Business as those having 50% assets as home loans and 75% of which should be for individual buyers, in a proposed review of the existing norms for HFCs.
The proposal comes months after Dewan Housing Finance (DHFL) suffered a blowout, where many of its retail loans were discovered to have been diverted to group companies.
The Housing Companies will be given much time to achieve this target – 60% by March 31, 2022, 70% of it by March 31, 2023, and 75% by March 31, 2024. The Housing Finance companies are allowed to lend only at one level, owing to the rise of double financing cases.
For commercial real estate (CRE) by means of investment in land and building shall in no way be more than 20% of the capital fund and in case of the capital market should not exceed 40% of net worth total exposure. In case of any exposure taken by the HFC, it should not exceed 15% of the owned fund for a single entity in the group.
For those who choose to buy housing units from entities in the group, the HFC will be required to follow the arm’s length principles as regulated by the RBI. The regulations have been proposed in two classifications namely- Systematically important and Non-systematically important.
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