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New draft norms: 50% of HFCs’ assets must be housing loans

New draft norms: 50% of HFCs’ assets must be housing loans

In a proposed review of the existing norms for housing finance companies (HFCs), the Reserve Bank of India (RBI) on Wednesday clearly defined the ‘housing finance’ business. The regulator defined HFCs as those that have 50% assets as housing loans and 75% of which should be for individual homebuyers.
The proposed norms come months after the blowout at DHFL, where a chunk of retail loans were found to have been diverted to group companies.

Housing companies will be allowed to achieve this target in a staggered manner — 60% by March 31, 2022, 70% by March 31, 2023, and 75% by March 31, 2024.

In order to address concerns on double financing due to lending to construction companies in the group and also to individuals purchasing flats from the latter, the HFC concerned may choose to lend only at one level, the central bank proposed. “That is, the HFC can either undertake an exposure on the group company in real estate business, or, lend to retail individual homebuyers in the projects of group entities but not do both,” the proposed guidelines said.

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