The top 20 or so housing finance companies (HFCs), which hold over 70 per cent of the market share, already comply with the minimum net owned fund (NOF) requirement of ₹20 crore prescribed by the Reserve Bank of India (RBI) in its revised regulatory framework for HFCs.

Also read: RBI’s review of regulatory framework for HFCs

However, smaller HFCs may face issues while raising the capital and may choose to be reclassified in other categories of NBFCs (non-banking finance companies) or exit the segment, CARE Ratings said in a report.

Currently, around 100 HFCs are registered with the National Housing Bank (NHB).

The RBI has increased the minimum NOF for HFCs from ₹10 crore to ₹20 crore, as per the revised regulatory framework for HFCs issued on October 22, 2020. An HFC holding a Certificate of Registration (CoR) and having NOF of less than ₹20 crore may continue to carry on the business of housing finance if it achieves NOF of ₹15 crore by March 31, 2022 and ₹20 crore by March 31 2023.

It will be incumbent upon such HFCs, whose NOF currently stands below ₹20 crore, to submit a statutory auditor's certificate to the RBI within one month evidencing compliance with the prescribed levels as at the end of the period indicated above.

HFCs failing to achieve the prescribed level within the stipulated period shall not be eligible to hold the CoR as HFCs and registration for such HFCs shall be liable to be cancelled.

Companies that wish to be treated as NBFC-Investment and Credit Companies (NBFC-ICCs) will be required to approach the RBI for conversion of their CoR from HFC to NBFC-ICC.

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