Assocham for HFCs to be classified separately from NBFCs

SEBI has clubbed HFCs with NBFCs and other finance companies.

New Delhi: Industry chamber Assocham has suggested the Finance Ministry classify housing finance companies (HFCs) separately from high-yielding non-banking financial companies (NBFCs) and other finance companies.

"HFCs should be considered as a separate sector for the purpose of sectoral caps proposed for investments by mutual fund schemes. More so, as the HFCs lend at 10.5 percent per annum for home loans to the masses, they cannot compete with NBFCs," Assocham said in a statement.

The low interest housing loans disbursal from HFCs would result in increased demand for new homes, it said.

This would aid creation of additional housing stock in the country thereby reducing the shortage of urban housing, it said in a communication to Finance Minister P Chidambaram.

Besides, the increased demand for new homes would not only support various sectors like cement, steel and other construction related ancillary industries but will also boost the employment scenario, Assocham said.

For the purpose of sector classification, the Securities and Exchange Board of India (SEBI) has clubbed HFCs with NBFCs and other finance companies.

In view of the shortage of the housing stock and low mortgage penetration, the RBI has qualified housing loans as one of the priority sector areas.

As per the Ministry of Housing and Urban Poverty Alleviation, India faces urban housing shortage of over 26 million units.