RBI proposes new rules for housing finance companies

News: Reserve Bank of India(RBI) has proposed new guidelines for Housing Finance Companies(HFCs).


  • What are Housing Finance Companies(HFC)? It means financing for purchase, construction or repair of residential dwelling units and some other activities including giving loans to corporates and government agencies for employee housing projects.
    • All other loans including those given for furnishing dwelling units, loans given against mortgage of property or renovation of the existing dwelling unit will be treated as non-housing loans.
  • Qualification for HFC’s: To qualify as a housing finance company, 50% of net assets should be to real estate lending of which at least 75% should be towards individual housing loans.
  • Classification: RBI has classified housing finance companies(HFC) as systemically important and non-systemically important:
    • Non-deposit taking HFCs with asset size of ₹500 crore and above and all deposit taking HFCs irrespective of asset size will be treated as systemically important HFCs.
    • HFCs with asset size below ₹500 crore will be treated as non-systemically important HFCs.
  • Minimum Net Owned Fund: RBI has proposed to double the minimum net owned fund(NOF) requirement for housing finance companies to Rs 20 crore.
  • Lending: HFCs can either lend to the group company in real estate business or lend to retail individual homebuyers in the projects of group entities but not to both.