HFCs should be allowed to fund land developers: Deepak Parekh

The regulators have not allowed banks and housing finance companies to fund land transactions, yet non-banking financial companies (NBFCs) and private equity players are permitted to do so in the past 12 years.

By: ENS Economic Bureau | Mumbai | Updated: July 5, 2018 3:25:22 am
HDFC chairman, Deepak Parekh, women, woman director, board, public listed companies, SEBI, Sebi, gender, corporate, gender sensitivity, India business, business news HDFC Chairman Deepak Parekh (File Photo)

HDFC Chairman Deepak Parekh has said housing finance companies (HFCs) should be permitted to fund developers for affordable housing and help reduce the cost for a homebuyer. Parekh also came down on “lazy housing finance” and batted for compensation when a home loan customer is poached by other firms.

The regulators have not allowed banks and housing finance companies to fund land transactions, yet non-banking financial companies (NBFCs) and private equity players are permitted to do so in the past 12 years. “This regulatory arbitrage allows NBFCs and private equity players to levy prohibitively high interest rates on developers borrowing to acquire land,” Parekh said.

“My key question is if NBFCs are allowed to cross over into activities of HFCs, then why can’t HFCs be permitted to fund developers to buy land for affordable housing?” Parekh asked.

According to him, one can understand the RBI’s predicament of not wanting banks at this juncture to fund land transactions. “But the core role of HFCs is to support housing. If HFCs of a certain threshold size are permitted to fund developers to acquire land for affordable housing, then the current high rates are likely to get rationalised. This in turn will help reduce the ultimate cost for a homebuyer,” Parekh said.

“HFCs are well regulated. The National Housing Bank, the regulator for HFCs, understands the nuances and can ensure there is sufficient vigilance to guard against any speculative funding of land transactions,” he said.

Coming out against poaching customers, Parekh said: “The growing practice of housing finance players picking loans off each other’s balance sheet needs to be carefully monitored.” With the regulators prohibiting prepayment charges on most home loans, no one gains in this game, except the agent who keeps collecting commissions. “Lenders do incur costs while originating loans. It is thus logical that there be some compensation to a lender — especially when a customer is poached within a timeframe of say, less than two years,” he said.

“To my mind, regulators should not encourage lazy housing finance,” Parekh said.

Parekh said the single roadblock in the sector today is the cussedness of state governments and local authorities in embracing a transparent process. “…the government has been ahead of the curve in adopting digitisation to make processes more efficient. Yet, one fails to understand the reluctance to put in place an online, time-bound, single-window clearance mechanism for fast-tracking the approvals required for affordable housing,” he said.

Succession planning key agenda, says Parekh

HDFC Chairman Deepak Parekh has said succession planning both within HDFC and its group companies is a key agenda.  “Personally, the task of ensuring frictionless transitions is and will be on the top of my mind. That said, it is not as if there will be any announcements right away. All the boards of the HDFC group of companies believe that succession planning needs a time frame of 18 to 24 months to ensure a smooth transition,” he said in his letter to shareholders.

“I am confident of the strong pipeline of talent for various functions across all companies within the HDFC group. Yet, positions at the helm require the respective boards and nomination and remuneration committees to evaluate options of both, internal and external candidates,” Parekh said “As passionate and energetic as some of our leaders within the HDFC group are about their jobs, the reality is that individuals do get on in age.”

At HDFC, the board and Keki Mistry have agreed that he will continue in his present capacity as Vice Chairman and CEO for a period of three years, subject to shareholders’ approval, Parekh said. —ENS

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