Housing finance players say RBI draft regulations provide clarity

Housing finance players have said the draft guidelines issued by the Reserve Bank of India for regulating the sector is in line with expectations and unlikely to cause too many disruptions.

VS Rangan, ED, mortgage lender HDFC, said: “I don’t think there is a major shift in the proposed guidelines. Most of these provisions have been in there in the NHB statutes in some form or other. For example, the provision on not less than 50 per cent qualifying assets -this was one of the covenants already prescribed by the NHB for HFCs that were taking refinancing from it.”

A Macquarie Research report noted that HDFC will not be impacted by the RBI’s proposal for net assets as a substantial part of 76 per cent of the loans are already towards individuals. “Only 10 per cent of overall individual loans are towards LAP (loan against property),” it noted.

According to PNB Housing Finance, the regulations will bring more of a level playing field for HFCs with other non-bank finance companies.

“It is a very good move. NHB had done a good job and they had been a very good catalyst to support HFCs, but the regulatory control moving to RBI helps get a level playing field as HFCs were the only set of NBFCs not regulated by the RBI. The draft regulation also clarifies without ambiguity what activities are included in housing finance,” said Kapish Jain, CFO, PNB Housing Finance, adding that the only item on their wish list is that the draft has spoken of a two to three year timeline for harmonising some regulations of NBFCs with HFCs.

“If there is any further clarity on the roadmap, it will help us plan our business better,” he said.

For PNB Housing Finance, the share of individual housing loan to AUM as on March 31stood at 58 per cent and Jain said the company has been focussing more on the retail side over the last 15 to 18 months. “We more than comfortably satisfy the requirement,” he noted.

Pavan K Gupta, CEO, Muthoot Housing Finance, also said the guidelines bring more clarity for the sector. “This is a welcome move and brings all regulations under one umbrella. It brings clarity on definition of HFC and asset qualifying under housing. Allowing HFCs to consider perpetual debt as Tier 1 component is significant,” he noted.

Industry sources, however, said that the RBI proposal on double financing could impact some HFCs that also have real estate companies in the group. “The HFC concerned may choose to lend only at one level. That is, 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 regulations have said and has laid out caps for any exposure in group entities.