New Delhi: Capital markets regulator Sebi should classify housing finance companies as a separate sector from NBFCs to attract more fund flows from mutual funds than the prescribed limit for Non-Banking Financial Companies, industry body Assocham said on Thursday.
It suggested SEBI "to classify Housing finance companies (HFCs) as separate sector and not to club with non-banking financial companies (NBFCs) for the purposes of sectoral limits proposed for investments by mutual funds schemes".
"Housing Finance Companies (HFCs) make housing loans available to the masses at low interest rates of 10.5 percent per annum, leading to fulfillment of the social objective of increase in home ownership" said D S Rawat, secretary general Assocham.
The annul home loan disbursement in the country is about Rs 1.80 lakh crore and the mutual funds are one of the important sources of funding for HFCs, the industry body said.
"HFCs should be considered as a separate sector for the purpose of sectoral caps as HFCs lend at 10.5 percent for home loans and cannot compete with high yielding NBFCs paper, it said.
Low rate of interest for housing loans from HFCs will create more demand for new homes and add to the creation of more housing stock in the country and reduce the shortage in urban housing stock, he further added.
Also, the increased demand for new homes will support industries like cement, steel and other construction related ancillary industries and generate employment.
It is estimated that the current urban housing shortage in India is 26.53 million units. The mortgage to GDP penetration in India is only 9 percent vis a vis 15-30 percent for its South East Asian peers.
First Published: Thursday, July 12, 2012, 23:54