INSUBCONTINENT EXCLUSIVE:
To scrutinise dealings in the real-estate sector, National Housing Board (NHB) has written to housing finance companies (HFCs) seeking
exposure to several developers, according to two sources in the know.
A key concern that NHB may have is that a large sum of money could be
routed to troubled developers
These guidelines include lending in a way the NHB and the central bank direct.
Confirming the development, the head of a large HFC said:
initiatives on housing, particularly affordable homes, the government and the regulator have issued licences to HFCs in the recent past
This also includes companies with no major experience in the space
The number of HFCs has doubled to 95 in the past five years.
Analysts say keeping a track on these companies is now a challenge
Despite the focus on affordable housing, HFCs have entered into non-traditional products such as LAP (loan against property), and large
loans to developers that carry a comparatively higher risk.
To alleviate the liquidity crunch the sector is facing after a series of
defaults by the group companies of ILFS, the housing finance regulator said it has increased the refinance limit for 2018-19 to Rs 30,000
crore from Rs 24,000 crore earlier
Despite the tough environment, HFC and NBFC funding to real estate has increased at a compounded rate of 45 per cent over the past four
years.
In comparison, bank funding to the sector has grown at 4.7 per cent.
The HFC and NBFC market share in developer financing has
increased from 24 per cent to 53 per cent during the same period
Commercial paper (CPs), a short-term (less than one year) debt instrument, has been a popular borrowing tool for HFCs.
According to
estimates, CPs issued by HFCs worth Rs 2 lakh crore will mature over the next one year and will need to be rolled over
Mutual funds own around 55 per cent of these CPs
Analysts believe that the funds may not be able to sustain this, as they have outsized their permissible exposure to HFCs, likely causing
further financial crunch in the sector.
