The Reserve Bank of India proposes to tighten the rules governing home financing companies, especially their financing builders. RBI specifically wants that home financiers should not be simultaneously allowed to lend to a real estate developer as well as homebuyers in the developer’s project. RBI is now the regulator for mortgage lenders, a job hitherto handled by the National Housing Bank. Home financiers will now be regulated as a category of NBFCs. Under the NHB regulations, there was no formal definition of housing finance. RBI has now released a draft framework for housing finance companies, which describes housing finance as ‘financing for purchase/ construction/ reconstruction/ renovation/ repairs of residential dwelling unit …” and some other activities, including giving loans to corporates and government agencies for employee housing projects. It said all other loans, including those given for furnishing dwelling units, loans given against mortgage of property for any purpose other than buying/construction of a new dwelling unit/s or renovation of the existing dwelling unit/s, will be treated as non-housing loans. It has also classified housing finance companies as systemically important and non-systemically important stating non-deposit taking HFCs with asset size of ₹500 crore and above; and all deposit taking HFCs irrespective of asset size will be treated as systemically important HFCs. HFCs with asset size below ₹500 crore will be treated as non-systemically important HFCs.
