BackRBI's draft rules for home loan lenders leave an easy road for compliance
The draft norms released on Wednesday largely reiterate existing rules for housing finance companies, or HFCs, on capital adequacy but have sought defining the business more accurately
PremiumThe Reserve Bank of India (RBI) has given a long and easy road for compliance as it seeks to harmonise rules governing housing finance companies (HFCs) and non-banking finance companies (NBFCs).
The draft norms released on Wednesday largely reiterate existing rules for HFCs on capital adequacy but have sought defining the business more accurately. A progressive path for increasing capital adequacy has also been proposed.
The new definition leaves out loan against property from being labelled as a housing loan if the proceeds are used for anything other than buying another residential property. This could prompt reclassification by some lenders.
HFCs should have 75% of their loans to individuals and those lenders that do not meet this criteria time until FY24 to do so. Most HFCs are already complying with this criteria, analysts said. Some players such as Piramal Enterprises Ltd may not meet the criteria, according to analysts at Motilal Oswal Financial Services. The share of individual loans in Piramal’s book is just 11%, the brokerage firm pointed out.
Also, to avoid double exposure to a project by way of lending to the developer as well as the buyer of the house, the central bank has proposed some tightening. This pertains to real estate projects belonging to the same group the HFC comes under. “The HFC can either undertake an exposure on the group company in real estate business OR lend to retail individual home buyers in the projects of group entities, but not do both," the draft norms said. Here too, analysts believe that most lenders are prudent enough on exposures.
Even so, HFCs belonging to large groups may have to relook at their exposures.
Besides, HFCs would need to maintain liquidity coverage ratio and beef up their capital adequacy ratio to 14% in the next one year and 15% by FY22.
The draft norms aim to strengthen the HFCs at a time when stress in the real estate sector has been mounting. The RBI is willing to give time for the same.
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