RBI says HFCs must lend 60% of loans for housing only

RBI says HFCs must lend 60% of loans for housing only

RBI has released the final guidelines for housing finance companies (HFCS). It said all non-banking financial companies (NBFCS) should have at least 60 per cent of their net assets deployed in the business of providing finance for housing, and those who still don’t have that ratio, must do so in a phased manner by March 31, 2024. HFCS cannot levy foreclosure charges, or prepayment penalties on any floating rate term loan sanctioned for housing loans.

Of the total net assets, at least 50 per cent should be loans given to individuals. Loans given for furnishing dwelling units, against mortgage of property for any purpose other than buying or construction of a new dwelling unit or renovation of the existing dwelling unit, will be treated as non-housing loans and will not fall under the definition of housing finance, stated the RBI’S guidelines.

The RBI took over the regulation of HFCS from the National Housing Bank in August 2019, and in June this year, released the draft guidelines.

According to the final guidelines, any HFC not having 60 per cent of its net assets deployed for housing loans must get 50 per cent of its books utilised for such loans by March 31, 2022, 55 per cent by March 31, 2023, and 60 per cent by March 31, 2024. Minimum percentage of individual housing loans in this period should be progressively raised to 40 per cent, 45 per cent, and 50 per cent, respectively.

“Such HFCS shall be required to submit to the RBI, a board-approved plan within three months, including a road map to fulfil the above-mentioned criteria and timeline for transition,” said the final guidelines.

HFCS unable to fulfil the above criteria will be treated as NBFC- Investment and Credit Companies.