Much Needed Alignment For Housing Finance Companies

Housing finance companies (HFCs) have traditionally occupied a staid corner of the financial sector, providing loans to homeowners and for the development of the housing industry. As a sector, housing finance has also been a "safe investment" as loans secured against mortgages are considered among the least risky assets. However, adverse liquidity conditions for non-banking financial companies (NBFCs) and the crisis at Dewan Housing Finance led to stakeholders reconsidering their views of HFCs. A key consideration was regulatory arbitrage in that NBFCs are stringently regulated by the Reserve Bank of India (RBI), while the perception was that HFCs are subject to a somewhat lighter form of supervision. It was thought appropriate to align the regulatory regimes applicable to NBFCs and HFCs.