NHB Circular On Subvention Scheme Won’t Have Significant Impact On Business Growth, Says HDFC
A loan file sits on a desk at a Housing Development Finance Corp. (HDFC) bank branch in Mumbai, India (Photographer: Dhiraj Singh/Bloomberg)  

NHB Circular On Subvention Scheme Won’t Have Significant Impact On Business Growth, Says HDFC


Housing Development Finance Corporation Ltd. on Tuesday said the National Housing Bank’s direction to housing finance companies to desist from providing loans under subvention scheme will not have “significant impact” on business as its exposure is less than 2 percent of individual loans through this route.

HDFC said the company collects the amount due from the developers upfront as a precautionary measure.

On Monday, the NHB asked HFCs to "desist" from offering loans under subvention scheme wherein real estate developers pay pre-EMIs on behalf of homebuyers for a certain agreed period.

The direction was issued by the NHB in view of several complaints of fraud allegedly committed by certain builders using subvention schemes.

In a regulatory filing, HDFC said it has received several queries regarding the circular issued by the NHB on July 19 to all registered housing finance companies on disbursement of housing loan to individuals under the subvention scheme.

Also read: NHB Circular On Interest Subvention Schemes May Affect Realty Funding

HDFC said its “exposure to housing loan products involving subvention schemes offered by developers is negligible, at less than 2 percent of the individual loans. As a precautionary measure, in such cases, the amount due from the developer is collected upfront by the corporation.”

The company said “there is unlikely to be any significant impact on growth of its individual business due to the (NHB) circular.”

In the case of under-construction properties, HDFC said that as a policy, the company disburses loans to individuals based on the stage of construction.

It has adequate mechanisms for monitoring the progress of construction of housing projects and customer consent is obtained prior to the release of each stage of payment to the developer.

Also read: NHB Proposes Higher Buffers, Lower Borrowing Cap For Housing Finance Companies

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