Real Estate developers hail NHB for proposing Modi government to ease CAR for HFCs

In a bid to create a smooth credit line for housing finance companies (HFC) and meet the Modi government's goal of housing for all by 2022, the National Housing Bank (NHB) has proposed the central government to ease the capital adequacy ratio (CAR) norms. The real estate developers have hailed the move citing the step would lead to further strengthening the capitalisation structures of the HFCs, major lending institution for the real estate sector, especially after the IL&FS crisis. 

Manju Yagnik, Vice-President NAREDCO (Maharashtra) told Zee Business online, “On the backdrop of the existing financial crisis, this move was highly unexpected and flabbergasted majority of the industry experts. However, considering the fact that liquidity is the need of the hour, the decision to ease capital adequacy ratio to 15 per cent over the next 3 years is going to be supremely effective for the revival of the sector in the long run. As any financial player in the sector, housing finance companies are vulnerable to various kind of risks pertaining to liquidity and solvency among others hence it is imperative to make capital easily available for HFCs as liquidity crunch is acting as a major hurdle for the overall growth of the housing market."

Manju Yagnik of NAREDCO (Maharashtra) further added that the availability of surplus capital will assist in sector revival and also get us closer to achieve the government’s goal of housing for all by 2022. This move will also enable the NBFCs and HFCs to reduce the high borrowing costs as well. Even though the immediate impact will not be seen, but this is definitely a good move for the developers in the long run who can now hope to attain capital for the proper functioning of their business.

Abhinav Joshi, Head of Research, CBRE India said, “The National Housing Board’s recent proposal to ease Capital Adequacy Ratio norms of Housing Finance companies is a welcome one. The move will also bring in greater stability to the housing finance ecosystem and improve confidence among various stakeholders. Furthermore, it will also act as a cushion against liquidity and solvency risks. Availability of adequate capital is also one of the important measures to achieve the government’s vision of Housing for All."

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