NHB’s revised policy will encourage the housing sector: Crisil

As per credit rating agency Crisil, the National Housing Bank’s (NHB) revised guidelines for Housing Finance Companies (HFCs) focusing attention on tighter capital will fundamentally strengthen the sector and increase investor confidence at a time of liquidity requirement among non-banks.

Crisil found that 25 companies considering 90% of the industry’s assets are already adhering with the rules by having their core tier-1 capital at 4% points higher.

It further added that a substantial balance sheet and raised capital level will make HFCs better place to sense asset-side risk in the course of time.

In its revised guidelines, the National Housing Bank (NHB) asked Housing Finance Companies (HFCs) to raise the core capital adequacy to 10% from 6% and asked them to raise the overall capital adequacy to 15% from the present requirement of 12% earlier.

The maximum leverage that HFCs can enforce has been decreased to 12 times over a period of 3 years and the overhead deposits that HFCs can put in circulation have been reduced to three times of net owned funds from five times.

According to Crisil, the new measures are not expected to hold down too many players as the mortgage growth expectations also softened.

HFCs have risen at an average of 20% over the past 3 years, even though the drop in growth in the second half of the financial year 2019. Yet if this growth were to be managed over the next couple of years, actual net worth and the internal hike should be sufficient for the majority of players.

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