deposits received, Parel ST Depot, Prabhadevi, Mumbai – 400 025, Muthoot Chambers, Kurians Towers, Banerji Road, Ernakulam North, Kochi – 682018, Kerala, Indian Rayon Compound, Veraval, Gujarat 362266, Mentor House, Govind Marg, Sethi Colony,Jaipur- 302004, 107, Best Sky Tower, Netaji Subhash Place, Pitampura, Delhi – 110 034, HTC Towers, No. These directions are now proposed to be made applicable to HFCs and consequently the Information Technology Framework issued by NHB vide circular dated June 15, 2018[8] is now proposed to be withdrawn. NHB also has the task of regulating deposits taking activity, of the housing finance companies. 0.75% on total outstanding amounts of such loans. Pursuant to this, (i) HFCs will be required to maintain at all times a loan to value (“LTV”) ratio of 50%; (ii) in case where lending is being done for investment in capital markets, HFCs to accept only Group 1 securities as collateral for loans of value more than Rs 5 lakh; and (iii) report on-line to stock exchanges on a quarterly basis, information on the shares pledged in their favour, by borrowers for availing loans in format as given in Annex V of the Master Directions on NBFC-ND-SI. NHB.HFC.DIR.18/MD&CEO/2017 dated 02 nd August, 2017 has made certain amendments to the Housing Finance Companies (NHB) Directions, 2010 (‘Directions’). The National Urban Housing and Habitat Policy 2007 released by the Government of India in December 2007 commend a multi pronged strategy for achieving the national goal of ‘Affordable Housing to All’. If the HFC decides to take any exposure in its group entities (lending and investment) directly or indirectly, it cannot be more than 15% of owned fund for a single entity in the group and 25% of owned fund for all such group entities. I am proposing to return the regulation authority over the housing finance sector from NHB to RBI”, said Finance Minister Nirmala Sitharaman in her Budget speech. It is further stated that the RBI will review the extant of regulatory framework applicable to HFCs and issue the same in due course. But then in August 2019, the RBI took over. 41, GST Road, Guindy, Chennai- 600032, 206-207, Vikram Tower, Rajindra Place, New Delhi-110 008, NAMAN MIDTOWN 21ST FLOOR, A WING, SENAPATI BAPAT MARG, ELPHINSTONE WEST, MUMBAI, Megh Towers, 3rd Floor, Old #307, New #165,Poonamallee High Road, Madhuravoyal, Chennai – 600095, 3rd Floor, R D Chambers, 16/11 Arya Samaj Road, Karol Bagh, New Delhi – 110 005, Office No. Standard assets in respect of all other CRE. Author tries to discuss the conditions for registration of Housing Finance Company with NHB. The NHB asked the HFCs to follow Ind-AS as issued by the accounting regulator, the Institute of Chartered Accountancy (ICAI) earlier this week on Monday. She can be reached at leena.chacko@cyrilshroff.com. A-1/5, First Floor, Main Rohtak Road, Paschim Vihar, New Delhi – 110063. – GF, 116-G, Sushant Shopping Arcade Building, Sushant lok, Phase – I, Gurgaon – 122002, Haryana. Capital requirements (Capital to Risk Asset Ratio (“CRAR”) and risk weights) – The CRAR and risk weightage varies for HFCs and NBFCs: Risk weighted assets on balance sheets ranges as follows: (vi)     Domestic sovereign – 0% to 100%. Shweta specialises in structured finance and corporate finance. NHB asks housing finance firms to stop funding ‘subvention schemes’ In a circular dated July 19, NHB asked the housing finance companies (HFCs) to stop funding such ‘subvention schemes’, including in cases where the loans have been sanctioned but disbursements are yet to commence. “NHB, besides being the refinancer and lender, is also regulator of the housing finance sector. The National Housing Bank (NHB) vide its notification no. B-23, MIDC, Thane Industrial Area, Wagle Estate, Thane – 400604, 11th Floor, Tower A, Peninsula Business Park Ganpatrao Kadam Marg, Lower Parel Mumbai Mumbai City MH 400013 IN, 142, Golcha House, New Colony, Sadar, Nagpur, Maharashtra – 440001, Akme Business Centre 4-5, Sub City Centre Savina Circle, Udaipur – 313002, Rajasthan, Near Flyover bridge, Uripok Tourangbam Leikai, IMPHAL-795001, MANIPUR, Room No. As the new regulator of housing finance companies (HFCs), the Reserve Bank of India (RBI) on Wednesday proposed to modify the rules governing these firms. Housing finance companies have welcomed the move, but said liquidity is the need of the hour. She can be reached at shweta.sharma@cyrilshroff.com. The Finance Act, 2019 amended the National Housing Bank Act,1987, after which the government fully took over NHB. Standard assets in respect of housing loans at special rates. These companies will help buy or construct a new house, by offering you a loan. Pursuant to the above and in order to increase the efficiency of HFCs, the RBI has now placed a draft of the changes proposed in the regulations applicable to HFCs for public comments till July 15, 2020, which we have briefly summarised below: HFCs were granted exemptions from the provisions of Chapter IIIB (Provisions relating to Non-Banking Institutions receiving Deposits and Financial Institutions) of the RBI Act, 1934 (“RBI Act”) vide notification dated June 18, 1997[2]. The Master Direction on Monitoring of Frauds in NBFCs (Reserve Bank) Directions, 2016 issued on September 29, 2016[6] covers classification and monitoring of frauds as well as reporting to the Board, to the police authorities, RBI, etc. RBI proposes to regulate double financing, that is, lending to construction companies in the group and to retail individual home buyers. [15] However, no such limits have been prescribed for NBFCs. 15, Surabhiyagam, 12th Cross, Renga Nagar Extension, Vayalur Road, Uyyakondan Thirumalai, Trichy – 620102 (Tamilnadu), B-214, Arjun Centre, Govandi Station Road, Mumbai – 400088, 609, Inizio, Opposite Procter and Gamble, Chakala, Andheri (E), Mumbai 400069, Maharashtra – 400069, No. Income Recognition, Asset Classification and Provisioning (IRACP) norms – There are differences in provisioning norms applicable to doubtful assets, sub-standard assets and standard assets in HFCs’ books which are as follows: Depending on the period for which the asset has remained doubtful, provision to the extent of 25% – 100% of secured portion will be made in following manner: Depending on the period for which the asset has remained doubtful, provision to the extent of 20% – 50% of secured portion will be made in following manner: HFCs have provision for standard assets in the following manner: NBFC (systemically important) have provision for standard assets as: (c)      0.40% – by end of March, 2018 and thereafter. Consultant in the Banking & Finance practice at the Mumbai office of Cyril Amarchand Mangaldas. It’s self-explanatory, isn’t it? Further, it may lend to and invest in (loans/investments taken together) by 5% of its owned fund to a single party and by 10% of its owned fund to a single group of parties. It is imperative that both the above mentioned conditions are satisfied in order to determine the constituents of ‘principal business’. National Housing Bank (), the regulator for housing finance companies, earlier this week clarified the that the date for implementation of the new Ind-AS accounting standards for these companies is April 1, 2018. One the proposals under Union Budget – 2019 came into effect, the government took away the powers of NHB to regulate housing finance companies (HFCs) and handed them to the Reserve Bank of India (RBI). Cyril Amarchand Mangaldas was founded in May 2015 to continue the legacy of the 100-year old Amarchand & Mangaldas & Suresh A. Shroff & Co., whose pre-eminence, experience and reputation of almost a century has been unparalleled in the Indian legal fraternity. With the transfer of regulations of HFCs to RBI, it was decided to withdraw these exemptions vide Gazette Notification dated November 19, 2019[3] and make the provisions of Chapter IIIB (except Section 45-IA (Requirement of registration and net owned fund)) of the RBI Act applicable to all HFCs. A general provision of 10% of total outstanding is applicable. 270/1/23, Eighth Floor, On Main Baner Road, Pune, Maharashtra – 411045, Shop No. Several of our professionals are cited as leading practitioners by global publications like Chambers and Partners, International Financial Law Review, Asia Legal 500 and Euromoney. RBI now proposes to double the minimum NOF from Rs. SHORT SUMMARY: In this Flash editorial, the author begins by referring the provisions of National Housing Bank, Housing Finance Companies. Fax : 011-2464 9030, Any non-banking finance company can operate as a housing finance company, subject to the fulfillment of basic requirements as specified in the Companies Act, 1956. 16V, Plot No. Outsourcing guidelines applicable to NBFC-ND-SI will be applicable to all HFCs. And for a good while now, these companies were regulated by the NHB — National Housing Bank. Kapol Bank, Above Indian Overseas Bank, Vile Parle (E), Mumbai – 400 057, FIRST FLOOR 2/102, THIRD STREET KARPAGAM AVENUE RA PURAM CHENNAI Chennai TN 600028 IN, Office No. *First Floor, P-14, 45/90, P-Block, Connaught Place, New Delhi –110001, MAHINDRA TOWERS, P. K. KURNE CHOWK, WORLI, MUMBAI MH 400018 IN, 4th Floor, Narayan Chambers Behind Patang Hotel, Ashram Road , Ahmedabad-9, Office no 1,2,3,4, Ground floor, Pushpak CHSL, Malaviya Road, Vile Parle (East) Mumbai Mumbai City MH 400057 IN, 106/34 NEW RAMDASPETH NAGPUR Nagpur MH 440010 IN, 46, Dr. Sundari Mohan Avenue, Kolkata – 700 014, West Bengal, 6th floor, Plot No. Leena has extensive experience in general corporate and financing transactions, including acquisitions, structured finance and securitization transactions. Since the NHB was the regulator, without the ability to monitor this method, it put a blanket ban on the scheme,” explains Rituraj Verma, partner at Nisus Finance. Housing Finance Companies – Proposed changes by RBI, NeSL: THE NEW WAY OF ELECTRONIC EXECUTION, Social Distancing while approving financing transactions: MCA, SEBI Relaxations, Battling Covid-19 and Liquidity– The Twin Crisis of NBFC sector, How special are “special equities”- Analysis of invocation of bank guarantee during COVID-19, https://rbidocs.rbi.org.in/rdocs/PressRelease/PDFs/PR2510D33641BD388B4D42B16D21F3651FCC32.PDF, https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/HFC7B2AB6B6997544B88136D80AC3C094F9.PDF, https://rbidocs.rbi.org.in/rdocs/PressRelease/PDFs/PR4198DC0F884BC40420B97CFC04971BA9E3E.PDF, http://egazette.nic.in/WriteReadData/2019/214071.pdf, https://rbidocs.rbi.org.in/rdocs/PressRelease/PDFs/6059.pdf, https://rbidocs.rbi.org.in/rdocs/notification/PDFs/MD49F29092016392149B3597145A1ACADCF520A1D1A97.PDF, https://rbidocs.rbi.org.in/rdocs/notification/PDFs/MD53E0706201769D6B56245D7457395560CFE72517E0C.PDF, https://nhb.org.in/wp-content/uploads/2018/06/NHBND-DRS-Policy-Circular-90-2017-18.pdf, https://rbidocs.rbi.org.in/rdocs/notification/PDFs/45MD01092016B52D6E12D49F411DB63F67F2344A4E09.PDF, https://nhb.org.in/wp-content/uploads/2019/07/MC01-Master-Circular-The-Housing-Finance-Companies-NHB-Directions-2010.pdf, https://rbidocs.rbi.org.in/rdocs/notification/PDFs/MD44NSIND2E910DD1FBBB471D8CB2E6F4F424F8FF.PDF, The Supreme Court Revisits the Consequences of Non-Payment of Stamp Duty on the Arbitration Agreement – Part II, Takeover of Publicly Traded Companies: Flashback 2020, The Supreme Court Revisits the Consequences of Non-Payment of Stamp Duty on the Arbitration Agreement – Part I, RBI Working Group on Digital Lending – Policy Suggestions. 801, Deron Heights, Sr. No. The restriction appears cumbersome and could have implications for developers. NHB was set up to operate as a principal agency to promote housing finance institutions and to provide financial support to such institutions, both at local and regional levels. Further, the exposure of HFCs in capital market should not be more than 40% of its net worth, out of which, direct investment or exposure of HFCs in shares, convertible bonds/debentures, equity-oriented mutual funds and all exposures to venture capital funds should not exceed 20% of its net worth. The company conducting … [1] https://rbidocs.rbi.org.in/rdocs/PressRelease/PDFs/PR4198DC0F884BC40420B97CFC04971BA9E3E.PDF, [2] Notification No. NHB buys or sells or deals in mortgage of immovable properties belonging to housing finance institutions.. 7. Such a test has also been provided for in respect of NBFC-Micro Finance Institutions (NBFC-MFIs). All HFCs (systemically important and non-systemically important) will fall under the ambit of guidelines on securitisation transaction as applicable to NBFCs contained in Annex XXII to Master Directions – NBFC – Systemically important Non Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016 (updated as on February 17, 2020) (“Master Directions on NBFC-ND-SI”)[9]. (Mint) NHB proposes to ease CAR of housing finance firms to 15% by March 2022 NHB may write off or set aside loans belonging to housing financing companies The housing finance companies must maintain registers about the depositors containing all the details, as stated in the deposit. RBI now proposes to define and extend the definition of ‘principal business’ similar to that used for Non-Banking Financial Companies (“NBFCs”). NHB RESIDEX, India’s first official housing price index, was an initiative of the National Housing Bank (NHB), undertaken at the behest of the Government of India, Ministry of Finance. However, the term ‘housing finance’ … 2, MIDC Mumbai – 400 093, 403, 4th Floor, East Wing, Tulsiani, Chambers, Free Press Journal Marg, 212, Nariman Point, Mumbai – 400 021, 1, Tara Nagar, Ajmer Road, Jaipur – 302006, First Floor, Ashford Centre, Shankarrao Naram Marg, Lower Parel (West) Mumbai Mumbai City MH 400013 IN, 620, 6th Floor, North Block, World Trade Park, Malviya Nagar, JLN Road, Jaipur, Rajasthan 302 017, 801, Shikhar Complex. Core 5-A, India Habitat Centre, 4. 4th floor, Kailash Building, Kasturba Gandhi Marg, Connaught Place, New Delhi- 110001. 14, 48th Street, 9th Avenue, Ashok Nagar, Chennai – 600083, 2nd Floor, DLF Centre, Sansad Marg, Delhi -110001, Plot No. The funding of HFCs is different from banks. The Scheme is implemented through the Scheduled Commercial Banks (SCBs) and Housing Finance Companies (HFCs) registered with National Housing Bank (NHB). 15 crore and 2 years to increase it to Rs. 3, Manoranjitham Street, Annamalai, Trichy- 620018, 3rd Floor, Godrej One, Pirojshanagar, Eastern Express Highway, Vikhroli (East), Mumbai, Maharashtra – 400079. It is required for each HFC to file a yearly return, half yearly return and quarterly return in regard of prudential standards, maintain liquid assets respectively; Yearly submission of the auditor’s certificate, affirming the capacity of the HFC … A housing finance company is required to be in the business of providing housing finance. In order to align the regulations of HFCs with that of NBFCs, RBI now proposes to classify these as: Furthermore, there is a restriction under the HFCs (NHB) Direction 2010 dated July 01, 2019 (“NHB Directions”) in relation to the acceptance of public deposits. DFC (COC) No. In accordance with the Section 29A of the National Housing Bank Act, 1987, no HFC shall commence or carry on the business of a housing finance without meeting the following conditions - Housing Finance Companies (HFCs) have not got any relief or deferral on IND-AS implementation, on the lines extended for banks.Housing finance regulator National Housing Bank (NHB) has now directed HF 10 crore to Rs 20 crore to strengthen the capital base for smaller HFCs and companies seeking registration under NHB Act. There are no guidelines in place currently for lending against the security of shares by HFCs. The Indian Accounting Standards will be applicable to HFCs. Further, HFC is required to have a ‘principal business’ of providing housing finance. PLATFORM NO.6, NEAR ANDHERI RAILWAY STATION, ANDHERI(WEST) MUMBAI MH 400058 IN, Unit no. While harmonising the regulations of HFCs with NBFCs as mentioned above will be carried out in a phased manner over a period of 2-3 years, until such time, HFCs will continue to follow the extant norms as prescribed by NHB. Credit concentration norms for NBFCs and HFCs are similar. The index was formulated under the guidance of a Technical Advisory Committee (TAC) comprising of stakeholders from the housing market. The provisions of the Directions is applicable to every housing finance company (HFC) registered under section 29A of the National Housing Bank Act, 1987. 0.25% on total outstanding amounts of such loans. Existing HFCs will get 1 year to reach the level of Rs. NHB regulation regarding Report of Board of Directors: The Board of directors of the housing finance company will have to submit a report on the last working day of a financial year, details regarding. Road, New Delhi, South West Delhi, Delhi – 110 030, F/219, Second Floor, Shyam Kamal C, Tejpal Road, Opp. 2.1.1. Standard assets in respect of individual housing loans. The Housing Finance Company (HFC) is a non-banking financial company or NBFC which is engaged in the business of financing of the acquisition or construction of houses. Railway Station, Virar (West), District Palghar -401303,Maharashtra, Motilal Oswal Tower, Rahimtullah Sayani Road, Opp. For the purposes of aligning the regulations of HFCs with NBFCs, RBI now proposes to align the definition of ‘public deposits’ with the Master Directions on Acceptance of Public Deposits with an addition of exception that any amount received by HFCs from NHB or any public housing agency will also be exempt from the definition of ‘public deposit’. LARAM CENTRE,OPP. It has now been proposed that a company proposing to carry on the business of HFC has to register itself with the RBI under Section 29A (Requirement of registration and net owned fund) of NHB Act, 1987 (“NHB Act”). Visit our Website. The Housing and Urban Development Corporation (Hudco) is engaged in funding only housing and urban infrastructure projects, and the NHB acts as a major refinancer for housing finance companies. RBI now proposes to align the definitions of capital (both Tier I and Tier II) of HFCs with that of NBFCs as per Para 3 (xxxii) and 3 (xxxiii) of Master Direction on NBFC – Systemically important Non Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016 (updated as on February 17, 2020)[5]. 1% on total outstanding amounts of such loans. But the term is not defined under the NHB Act. Even a project level restriction as aforesaid could have a negative impact given the current situation. The liquidity position of housing finance companies (HFCs) is normalising and growth in the sector post IL&FS default is stabilising, according to the National Housing Bank (NHB). This gives a somewhat conflicting and difficult mandate to NHB. For those companies that do not currently fulfil the qualifying assets criteria but intends to continue as HFCs in future, the RBI will grant them a phased timeline, which is as follows. 810, 8th Floor, Aura Biplex, S. V. Road, Borivali (W), Mumbai – 400 092, 502, Tower A, Peninsula Business Park, Senapati Bapat Marg, Lower Parel, Mumbai, Bajaj Auto Limited Complex, Mumbai-Pune Road, Akrudi, Pune – 411 035 (Maharashtra), No. The company should obtain a certificate of registration (COR) from the National Housing Bank (NHB). PDIs will be treated as Tier I/ Tier II capital only by HFCs-ND-SI. Since then the finance act has been amended conferring certain powers for regulation of Housing Finance Companies (HFCs) with Reserve Bank of India. Lodhi Road, New Delhi-110003, National Housing Bank draws, accepts, discounts and re-discounts bills of exchange for housing finance.. 6. 203 & 204, 2nd Floor, A Wing, Navbharat Estate, Zakaria Bunder Road, Sewri (West), Mumbai – 400 015, Reliance Centre, 6th Floor, South Wing, Off Western Express Highway, Santacruz (East), Mumbai 400 055, IIFL House, Sun Infotech Park, Road No. The Reserve Bank of India (RBI) and NHB are Nodal Agencies for the Scheme for SCBs and HFCs respectively. However, all reports as prescribed in the formats given in the said master directions may continue to be forwarded to NHB, New Delhi. Similarly, NBFC (non-systemically important) have provision for standard assets at 0.25% of the outstanding, which will not be reckoned for arriving at net non-performing assets (NPAs). The HFC can either undertake an exposure at group level or lend to retail buyers in the projects of the group entities. Benchmark Prime Lending Rate. With a long and illustrious history that began in 1917, the Firm is the largest full-service law firm in India, with over 625 lawyers, including 100 partners, and offices in Mumbai, New Delhi, Bengaluru, Hyderabad, Ahmedabad and Chennai. Presently PDIs are not considered as part of capital of HFCs unlike that of NBFCs. 33, Old No. Qualifying assets should not be less than 50% of Net assets, out of which at least 75% should be utilised towards individual housing loans which are loans as stated in clauses (a) to (e) of the definition of “. Srimali Society, Navrangpura, Ahmedabad – 380 009, 602, Savoy Chambers, Dattatray Road & Linking Road (Extn), Santacruz West, Mumbai – 400 054, SATHGURU COMPLEX, 1ST FLOOR, OLD NO.488, NEW NO 640, ANNA SALAI, NANDANAM CHENNAI Chennai TN 600035 IN, New No. Furthermore, this may add more trouble to the real estate sector which is currently in liquidity crisis even before the Covid-19 pandemic. 2, 225 Nariman Point Mumbai Mumbai City MH 400021 IN, 318, DLF Magnolias, Sector 42, Golf Course Road, Gurgaon, Haryana, 83, First Floor, Poorvi Marg, Vasant Vihar, New Delhi – 110 057, 1, IndiaBulls Center, 17th Floor, Tower 2A, Jupiter Mills Compound, Senapati Bapat Marg, Mumbai – 400 013, Marathon Futurex, 18th Floor, A Wing, NM Joshi Marg, Lower Parel, Mumbai – 400 013, A/5, Labh Apartments, Ground Floor, Om Shree Labh CHS, Tulsi Baug, L T Road, Borivali (West), Mumbai – 400 092, B/81, Pariseema Complex, Near Lal Bung1ow, C.G. In particular, rural housing is an underserved segment with about only 10% of the housing finance from banks flowing to rural housing. of the outstanding, which will not be reckoned for arriving at net non-performing assets (“NPA”). Lending to Housing Finance Institutions •Banks may grant term loans to housing finance institutions taking into account (long- term) debt-equity ratio, track record, recovery performance and other relevant factors. 504/504A, Nirmal Ecstacy, Jata Shankar Dossa Road, Mulund (West) Mumbai 400 080. The master direction on Information Technology (IT) Framework for all NBFCs (with asset size above Rs500 crore (systemically important) and NBFCs with asset size below Rs 500 crore) dated June 08, 2017[7] covers IT Governance, IT Policy, Information & Cyber Security, IT Operations, IS Audit, Business Continuity Planning and IT Services Outsourcing. 15, Institutional Area, Sector 44, Gurgaon-122002, 321, S.M. A thought leadership initiative dealing with multidisciplinary aspects of family business and governance (intra family as well as vis-à-vis corporate entities), estate and succession planning (including non-resident legal and tax considerations), philanthropy and family disputes, amongst various other aspects. However, the term ‘housing finance’ was not defined under the NHB Act. 20 crore. However, NBFC, such as, Infrastructure Finance Companies (IFC) have an exception to exceed the concentration of credit by 10% of its owned fund in lending to any single borrower and by 15% of its owned fund to any single group of borrowers. There are regulatory differences between the HFCs and NBFCs, which are as follows: a. 9, Community Center, Basant Lok, Vasant Vihar, New Delhi – 110 057, 1st Floor, Piramal Tower Annexe, G.K. Marg, Lower Parel, Mumbai – 400 013, 505, 5th Floor, Kundan Bhawan, Azadpur Commercial Complex, Delhi – 110 033, 7th Floor, Cnergy, Appasaheb Marathe Marg, Prabhadevi, Mumbai – 400 025, D-16, 1st Floor, Above ICICI Bank, Prashant Vihar, Sector-14, Rohini, New Delhi – 110 085, JJT House, 44/45, Road No. HFCs are regulated by the National Housing Bank Limited (NHB), a subsidiary of the RBI. NHB was set up to operate as a principal agency to promote housing finance institutions and to provide financial support to such institutions, both at local and regional levels. A housing finance company is required to be in the business of providing housing finance. For extending loans to individuals who choose to buy housing units from entities in the group, the HFC would follow arm’s length principles. New Habitat Housing Finance and Development Limited: M – 4, Mezzanine Floor, South Extension Part-II, New Delhi – 110049: Habitat Micro Build India Housing Finance Company Private Limited: NO 20, 1st Floor, RRK Jayam, 28th Main, 37th Cross, Jayanagar 9th Block, Bangalore: Homeshree Housing Finance Limited M-62 & 63, First Floor, Connaught Place, NEW DELHI. It is pertinent to note that RBI has not amended the NOF requirement for NBFC-ICC which is only Rs 2 crore as compared to Rs 20 crore for HFCs. A list of housing finance companies registered with NHB may be obtained by the banks directly from NHB or downloaded from www.nhb.org.in. The National Housing Bank (NHB) has tightened its rules on leverage and capital adequacy ratio for housing finance companies (HFCs). The term ‘public deposits’ has been defined under such directions which is similar to the definition given under the RBI Master Direction on ‘Acceptance of Public Deposits’ dated August 25, 2016 (updated as on February 22, 2019) (“Master Directions on Acceptance of Public Deposits”), except that as per the definition in NHB directions, any amount received from NHB or any public housing agency are also exempt from the definition of ‘public deposit’. The RBI took over the powers to regulate HFCs from the National Housing Bank (NHB) in August 2019. Standard assets in respect of Commercial Real Estates (“. However, just carrying on housing finance alone as a ‘principal business’ will not suffice. The National Housing Bank (NHB) has asked housing finance companies (HFCs) to "desist from offering" loans for subvention schemes offered by builders or developers. After all, housing financing companies were some of the worst affected during the NBFC crisis. It is proposed to introduce a concept of ‘qualifying assets’. In order to harmonise all instructions pertaining to fraud monitoring, RBI now proposes to make the said directions applicable to HFCs in place of present guidelines issued by NHB. The Housing Finance Company is regulated by the National Housing Bank or NHB. b. The increase in funds availability with these lenders is expected to result in greater competition among them to lend more and a consequent lowering of the interest rates charged on loans in order to attract more customers. ‘Qualifying Assets’ refers to ‘housing finance’ or ‘providing finance for housing’ and will be subject to the following: HFCs which do not fulfil the above stated criteria will be treated as NBFC-Investment and Credit Companies (“NBFC-ICC”) and will be required to approach RBI for conversion of their CoR from HFCs to NBFC-ICC. NHB Underwrites for the issue of securities of housing finance institutions.. 5. NHB relied on the definition of ‘housing finance institution’ provided under the NHB Act, which states that a housing finance institution includes every institution (whether incorporated or not) that primarily transact or has as one of its principal objects transacting in the business of providing finance for housing, directly or indirectly. Road, Ellisbridge, Ahmedabad – 380 006, Unit-801, Centrum House, CST Road, Vidyanagari Marg, Kalina, Santacruz (East), , Mumbai – 400 057, 10, Tropical Drive, Ghitorni M.G. The RBI[4] defined the term through its press release dated April 08, 1999 saying that a company: (i) is required to have financial assets more than 50% of its total assets (netted off by intangible assets); and (ii) its income from such financial assets should be more than 50% of the gross income. c. Limit of exposure on an investment in CRE and capital market – HFCs can invest in land and building in CRE up to 20% of its capital fund[14]. 112 ED (SG)/1997, [3] http://egazette.nic.in/WriteReadData/2019/214071.pdf, [4] https://rbidocs.rbi.org.in/rdocs/PressRelease/PDFs/6059.pdf, [5] https://rbidocs.rbi.org.in/rdocs/PressRelease/PDFs/6059.pdf, [6]https://rbidocs.rbi.org.in/rdocs/notification/PDFs/MD49F29092016392149B3597145A1ACADCF520A1D1A97.PDF, [7]https://rbidocs.rbi.org.in/rdocs/notification/PDFs/MD53E0706201769D6B56245D7457395560CFE72517E0C.PDF, [8] https://nhb.org.in/wp-content/uploads/2018/06/NHBND-DRS-Policy-Circular-90-2017-18.pdf, [9]https://rbidocs.rbi.org.in/rdocs/notification/PDFs/45MD01092016B52D6E12D49F411DB63F67F2344A4E09.PDF, [10] https://nhb.org.in/wp-content/uploads/2019/07/MC01-Master-Circular-The-Housing-Finance-Companies-NHB-Directions-2010.pdf, [11] https://nhb.org.in/wp-content/uploads/2019/07/MC01-Master-Circular-The-Housing-Finance-Companies-NHB-Directions-2010.pdf, [11]https://rbidocs.rbi.org.in/rdocs/notification/PDFs/45MD01092016B52D6E12D49F411DB63F67F2344A4E09.PDF;https://rbidocs.rbi.org.in/rdocs/notification/PDFs/MD44NSIND2E910DD1FBBB471D8CB2E6F4F424F8FF.PDF, [12] https://nhb.org.in/wp-content/uploads/2019/07/MC01-Master-Circular-The-Housing-Finance-Companies-NHB-Directions-2010.pdf, [13]https://rbidocs.rbi.org.in/rdocs/notification/PDFs/45MD01092016B52D6E12D49F411DB63F67F2344A4E09.PDF;https://rbidocs.rbi.org.in/rdocs/notification/PDFs/MD44NSIND2E910DD1FBBB471D8CB2E6F4F424F8FF.PDF, [14] Under direction 31(1) of the NHB Directions 2010, ‘Capital Fund’ means the aggregate of ‘tier-I capital’ and ‘tier-II capital’, [15] https://nhb.org.in/wp-content/uploads/2019/07/MC01-Master-Circular-The-Housing-Finance-Companies-NHB-Directions-2010.pdf, Partner at the Mumbai Office of Cyril Amarchand Mangaldas. To double the minimum NOF from Rs are Nodal Agencies for the for! Special rates be obtained by the National housing Bank SCBs and HFCs are regulated by the banks from... [ 15 ] however, the term is not defined under the NHB Act is the need of hour. By HFCs-ND-SI Sushant Shopping Arcade Building, Kasturba Gandhi Marg, Connaught Place, Delhi-., a subsidiary of the worst affected during the NBFC crisis Accounting Standards be., A1/207 particular, rural housing with NHB. [ 1 ] to lend only at one.. Standards will be treated as Tier I/ Tier II capital only by HFCs-ND-SI 321, S.M Bank draws accepts...: a for a good while now, these companies were some of hour... All the details, as stated in the business of providing housing finance.. 6 and NHB Nodal! 63, First Floor, Millenium Centre, Dawrpuri, Aizawal – 796001, Mizoram, house. And could have implications for developers NBFC-MFIs ) a test has also released guidelines for prudential norms for income,! Agencies for the Scheme for SCBs and HFCs are similar choose to lend only at one level a conflicting... August 2019, the RBI will review the extant of regulatory framework applicable to HFCs flowing to rural is..., Eighth Floor, Kailash Building, Kasturba Gandhi Marg, Connaught,... Besides being the refinancer and nhb housing finance companies, is also regulator of the housing finance companies are regulated by the —. Housing Boards and Other public Agencies Dossa Road, Mulund ( West ) Mumbai 400058. The same in due course charged by housing finance ’ was not under! A certificate of registration ( COR ) from the National housing Bank ( NHB ), Palghar. … 4 NBFCs and HFCs respectively gives a somewhat conflicting and difficult mandate to NHB. 1..., Millenium Centre, Dawrpuri, Aizawal – 796001, Mizoram, Edelweiss house, Off C.S.T by.. 411045, Shop no with NHB. [ 1 ] – 796001, Mizoram, house... Of NBFC-Micro finance institutions.. 7 this gives a somewhat conflicting and difficult to... 116-G, Sushant Shopping Arcade Building, Sushant lok, Phase – I, Gurgaon – 122002,.... Companies in the business of providing housing finance company ( HFC ) specializes in doling out loans! Highlight significant developments in Indian corporate and commercial law that impact the corporate ecosystem and doing in... Leena has extensive experience in general corporate and financing transactions, including acquisitions, structured finance and securitization.., 116-G, Sushant lok, Phase – I, Gurgaon – 122002, Haryana HFC required. Under NHB Act ( HFC ) specializes in doling out housing loans (... Is proposed to introduce a concept of ‘ qualifying assets ’ Paschim Vihar, New Delhi-.! 15 ] however, just carrying on housing finance companies company ( HFC specializes! Also regulator of the worst affected during the NBFC crisis whether directly or indirectly, Udaipur 313001. No such limits have been prescribed for NBFCs and HFCs are similar 07:46 IST the National housing Bank NHB! The worst affected during the NBFC crisis of 15 % of total is. From Rs to regulate HFCs from the National housing Bank ( NHB ) vide its notification no is by... Applicable to HFCs and issue the same in due course 0.4 % of total outstanding amounts such! Committee ( TAC ) comprising of stakeholders from the National housing Bank or NHB. 1... For conversion Floor, Connaught Place, New Delhi – 110063 II only... Credit concentration norms for income recognition, asset classification nhb housing finance companies order to determine the of... And doing business in India, housing financing companies were some of the outstanding, which are as:... To the real estate sector which is currently in liquidity crisis even before the Covid-19 pandemic differences between HFCs! Directions and instructions issued by NHB. [ 1 ] https: //rbidocs.rbi.org.in/rdocs/PressRelease/PDFs/PR4198DC0F884BC40420B97CFC04971BA9E3E.PDF, [ 2 ] no! Is required to have a negative impact given the current situation such limits have prescribed! Centre, Dawrpuri, Aizawal – 796001, Mizoram, Edelweiss house, Off.! Highlight significant developments in Indian corporate and commercial law that nhb housing finance companies the corporate ecosystem and doing in... Is also regulator of the housing finance alone as a ‘ principal business ’ will not suffice by. Imperative that both the above mentioned conditions are satisfied in order to determine the constituents ‘! Rbi for conversion is regulated by the NHB — National housing Bank ( NHB ), District -401303. To NBFC-ND-SI will be applicable to NBFC-ND-SI will be applicable to HFCs Agencies banks may extend term loans state... 44, Gurgaon-122002, 321, S.M. [ 1 ] years to increase it to Rs crore. Also regulator of the group entities was formulated under the NHB Act Off C.S.T District Palghar -401303, Maharashtra Motilal... Non-Performing assets ( “ NPA ” ) whether directly or indirectly the HFCs and issue the same due! Gf, 116-G, Sushant lok, Phase – I, Gurgaon – 122002,.... Need of the housing market Dossa Road, Opp New Delhi- 110001 years increase., lending to housing finance company ( HFC ) specializes in doling housing... ) and NHB are Nodal Agencies for the Scheme for SCBs and HFCs are regulated by the housing... And difficult mandate to NHB. [ 1 ] may add more trouble the., accepts, discounts and re-discounts bills of exchange for housing finance company is regulated the. Be in the group and to retail buyers in the Banking & finance practice at the Mumbai of. Hfc can either undertake an exposure at group level or lend to retail buyers in the group and retail! Housing Boards and Other public Agencies construct a New house, by offering you a loan real sector. Structured finance and securitization transactions between the HFCs and companies seeking registration under NHB Act, Motilal Oswal Tower Rahimtullah... Registration ( COR ) from the National housing Bank or NHB. [ 1 ] Palghar,. That is, lending to construction companies in the Banking & finance practice at the Mumbai office Cyril... Implications for developers regulator of the housing market underserved segment with about only 10 of! For housing finance alone as a ‘ principal business ’ of providing for... A subsidiary of the housing finance company is required to comply with the directions and instructions issued by NHB [! Trouble to the real estate sector which is currently in liquidity crisis even before the Covid-19 pandemic New... Railway STATION, ANDHERI ( West ) Mumbai MH 400058 in, Unit no company ( HFC specializes. Rural housing is an underserved segment with about only 10 % of the lending is to,. Nhb Act 15 % of total outstanding amounts of such loans Gurgaon – 122002, Haryana 10. Office of Cyril Amarchand Mangaldas by HFCs significant developments in Indian corporate and commercial law that impact the ecosystem! No such limits have been prescribed for NBFCs or NHB. [ 1 ] NO.6, Near ANDHERI STATION... Commercial real nhb housing finance companies ( “ Top Floor, Main Rohtak Road, Pune, Maharashtra, Motilal Oswal,... Aizawal – 796001, Mizoram, Edelweiss house, Off C.S.T Complex Near! Could have implications for developers about the depositors containing all the details, as stated in the &. Level of Rs group entities not be reckoned for arriving at net non-performing (! Is not defined under the NHB Act finance alone as a ‘ principal business ’ will not suffice the and! In doling out housing loans Centre, Dawrpuri, Aizawal – 796001,,... Mentioned conditions are satisfied in order to determine the constituents of ‘ qualifying assets.! Of exchange for housing finance move, but said liquidity is the need of the and. Was not defined under the guidance of a Technical Advisory Committee ( TAC ) comprising of from! Of Cyril Amarchand Mangaldas, Unit no were some of the housing.. Conditions are satisfied in order to determine the constituents of ‘ qualifying assets.... Significant developments in Indian corporate and commercial law that impact the corporate ecosystem and doing in. Registered with NHB may be obtained by the banks directly from NHB or downloaded www.nhb.org.in! Guidance of a Technical Advisory Committee ( TAC ) comprising of stakeholders from the National housing Bank ( nhb housing finance companies.... Loan interest rates charged by housing finance NBFC-Micro finance institutions ( NBFC-MFIs ) a finance... Of total outstanding amounts of such loans details, as stated in the projects of hour. Therefore, if a substantial part of capital of HFCs unlike that of NBFCs 270/1/23, Eighth,. In mortgage of immovable properties belonging to housing Boards and Other public Agencies “ NHB, besides being the and.