(ET)
The Reserve Bank of India has proposed tougher rules for housing finance companies (HFC), including lending and investment curbs in group entities to prevent conflict of interest, while changing the definition of “housing finance” and setting thresholds to identify the bigger players that are systemically important to the mortgage industry. The central bank said that HFCs can either take exposure on the group company in real estate business or lend to retail individual home buyersin the projects of group entities, but not do both.
This is aimed at addressing the “concerns on double financing due to lending to construction companies in the group and also to individuals purchasing flats from the latter,” RBI said in a draft regulation. “As regards extending loans to individuals who choose to buy housing units from entities in the group, the HFC would follow arm’s length principles in letter and spirit.”
