The Finance Act, 2019 amended the National Housing Bank Act,1987, after which the government fully took over NHB. 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”). Such a test has also been provided for in respect of NBFC-Micro Finance Institutions (NBFC-MFIs). In particular, rural housing is an underserved segment with about only 10% of the housing finance from banks flowing to rural housing. 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’. 16V, Plot No. 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. 0.75% on total outstanding amounts of such loans. It is further stated that the RBI will review the extant of regulatory framework applicable to HFCs and issue the same in due course. Presently PDIs are not considered as part of capital of HFCs unlike that of NBFCs. In the federal budget announced in July this year the government took away powers of the NHB to regulate mortgage finance companies. She can be reached at shweta.sharma@cyrilshroff.com. 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. The restriction appears cumbersome and could have implications for developers. 2.1.1. 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. This gives a somewhat conflicting and difficult mandate to NHB. 270/1/23, Eighth Floor, On Main Baner Road, Pune, Maharashtra – 411045, Shop No. RBI proposes to regulate double financing, that is, lending to construction companies in the group and to retail individual home buyers. And for a good while now, these companies were regulated by the NHB — National Housing Bank. It’s self-explanatory, isn’t it? A thought leadership initiative to highlight significant developments in Indian corporate and commercial law that impact the corporate ecosystem and doing business in India. The components of Tier I and Tier II capital are similar for NBFCs and HFCs except for the treatment of perpetual debt instruments (“PDI”). E-mail: ho@nhb.org.in, Credit Risk Guarantee Fund Trust for Low Income Housing (CRGFTLIH), NHB SUVRIDDHI (Tax Saving ) Term Deposit Scheme, Report On Trend And Progress Of Housing In India, Development House, 24, Park Street, Kolkatta-700016 ( As per HFC’s letter dated 16-04-2019 observed in file). 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]. Therefore, if a substantial part of the lending is to developers, then the HFC would have to approach RBI for conversion. 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. 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. 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. The Reserve Bank of India (RBI) and NHB are Nodal Agencies for the Scheme for SCBs and HFCs respectively. SHORT SUMMARY: In this Flash editorial, the author begins by referring the provisions of National Housing Bank, Housing Finance Companies. Standard assets in respect of Commercial Real Estates (“. 4. Until such time, HFCs were required to comply with the directions and instructions issued by NHB.[1]. ‘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. It is proposed to introduce a concept of ‘qualifying assets’. A housing finance company is required to be in the business of providing housing 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. 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