An Housing Finance Company (HFC) is a company incorporated under the Companies Act, 2013 which fulfills the following criteria:
- It is an NBFC1 whose financial assets, in the business of providing finance for housing, constitute at least 60% of its total assets (netted off by intangible assets)
- Out of the total assets (netted off by intangible assets), not less than 50% should be by way of housing financing for individuals
What is meaning of Housing Finance Company
Housing Finance” means financing, for purchase/ construction/ reconstruction/ renovation/ repairs of residential dwelling units, which includes:
- Loans to individuals or group of individuals including co-operative societies for construction/ purchase of new dwelling units.
- Loans to individuals or group of individuals for purchase of old dwelling units.
- Loans to individuals or group of individuals for purchasing old/ new dwelling units by mortgaging existing dwelling units.
- Loans to individuals for purchase of plots for construction of residential dwelling units provided a declaration is obtained from the borrower that he intends to construct a house on the plot within a period of three years from the date of availing of the loan.
- Loans to individuals or group of individuals for renovation/ reconstruction of existing dwelling units.
- Lending to public agencies including state housing boards for construction of residential dwelling units.
- Loans to corporates/ Government agencies for employee housing.
- Loans for construction of educational, health, social, cultural or other institutions/ centres, which are part of housing projects and which are necessary for the development of settlements or townships (see note below).
- Loans for construction meant for improving the conditions in slum areas, for which credit may be extended directly to the slum-dwellers on the guarantee of the Central Government, or indirectly to them through the State Governments.
- Loans given for slum improvement schemes to be implemented by Slum Clearance Boards and other public agencies.
- Lending to builders for construction of residential dwelling units
- Integrated housing project comprising some commercial spaces (e.g. shopping complex, school, etc.) can be treated as residential housing, provided that the commercial area in the residential housing project does not exceed 10 per cent of the total Floor Space Index (FSI) of the project.
Net Owned Fund (NOF) for HFC
The Reserve Bank has specified Rs 20 crore as the minimum net owned funds required for a company to commence housing finance company
A housing finance company holding a Certificate of Registration (CoR) and having net owned fund of less than Rupees twenty crore, may continue to carry on the business of housing finance, if such company achieves net owned fund of Rupees fifteen crore by March 31, 2022 and Rupees twenty crore by March 31 2023.
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