A Business Encyclopedia

Housing Finance Company

Definition: The Housing Finance Company is yet another form of non-banking financial company which is engaged in the principal business of financing of acquisition or construction of houses that includes the development of plots of lands for the construction of new houses.

The Housing Finance Company is regulated by the National Housing Bank. Any non-banking finance company can operate as a housing finance company, subject to the fulfillment of basic requirements as specified in the Companies Act, 1956.

  • The company should have its primary business of providing finance for housing, whether directly or indirectly.
  • The company should obtain a certificate of registration (COR) from the National Housing Bank (NHB). The company conducting such business without a COR is an offense punishable under the provisions of the National Housing Bank Act, 1987, also the NHB can demand the winding up of such company.
  • The company should have minimum Net Owned Fund of Rs 10 Crore.

Once these basic requirements are fulfilled, the company should comply with the following conditions to get registered as a Housing Finance Company:

  • The company shall be in such a position that it is able to meet the full claims of its present as well as future depositors as and when these accrue.
  • The affairs of the housing finance company should not be detrimental to the interest of the present and future depositors.
  • The management of the company should not be prejudicial towards public interest or to the interest of its depositors.
  • The Company should have an adequate capital structure and better income prospects.
  • The certificate of registration shall not be prejudicial to the operation and growth of housing finance sector of the country.

so. all the above conditions must be met by the non-banking finance company to perform the business of financing of houses (construction and acquisition).

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