What is Housing Finance Company Registration in India? - Newport Paper House

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What is Housing Finance Company Registration in India?


A Housing Finance Company is type of NBFC (Non-Banking Financial Company which is solely involved in the business of ‘Financing of Acquisition or Construction of Houses.’ Housing Finance Company are regulated under the provisions of the National Housing Bank Act, 1987. It is obligatory for every proposed housing finance business to obtain Housing Finance Company Registration from the National Housing Bank (NHB) before starting business activities in the housing finance sector.

Overview of Housing Finance Company Registration

Housing Finance Companies cannot commence business of accommodating funds without obtaining a CoR (certificate of Registration) from National Housing Bank, if a company is operating housing finance business without Housing Finance Company Registration is an offence under the provisions of National Housing Bank Act, 1987. National Housing Bank (NHB) can similarly document an application for ending up of such Housing Finance Company as per the provisions mentioned under section 33B of the National Housing Bank Act, 1987.

 A Housing Finance Company is type of NBFC (Non-Banking Financial Company which is solely involved in the business of ‘Financing of Acquisition or Construction of Houses.’ Housing Finance Company is regulated under the provisions of the National Housing Bank Act, 1987. It is obligatory for every proposed housing finance business to obtain Housing Finance Company Registration from the National Housing Bank (NHB) before starting business activities in the housing finance sector.

Regulating Authority of Housing Finance Company Registration

In Housing Finance Sector, National Housing Bank has the most crucial job. Regarding the amalgamation with the capital market and debts, the housing finance sector is in second stage of improvement in India.

To maintain the dependability and validity as far as development of resources is concerned; foundation working and strategy improvement of the housing finance sector in India, National Housing Bank set a feasible arrangement of guidelines.

For Housing Finance Companies, National Housing Bank has formed a set of Guideline in terms of:

  • Financial Assistance
  • Forethought  norms for income recognition
  • Asset Classification
  • Regulating deposits taking activity etc. with the objective to materialize housing finance sector there is need to perform synchronization between the Reserve Bank of India (RBI), National Housing Bank (NHB) and the Government.
  • Lending to the housing by banks is regulated by the Reserve Bank of India.
  • Lending to the housing by Housing Finance Company is regulated by National Housing Bank.

Requirements to Obtain Housing Finance Company Registration License

  • Housing Finance Company Registration is regulated by the National Housing Bank in India. It is obligatory for every proposed housing finance business to obtain Housing Finance Company Registration from the National Housing Bank (NHB) before starting business activities in the housing finance sector.
  • An organization must be registered as per the provisions of The Companies Act 2013 or Companies Act 1956 that wants to commence a Housing Finance Company at large.
  • A Housing Finance Company must have the primary object of providing housing finance or housing loan any structure either indirectly or legitimately.
  • In a Housing Finance Company there is a requirement of net owned fund of at least INR 10 crore.

Documents Required for Housing Finance Company Registration

  • Certified copy of Memorandum of Association (MoA).
  • Certified copy of Articles of Association (AoA).
  • Request Draft of INR 10, ooo for National Housing Bank New Delhi.
  • Board Resolution representing the objectives of the housing finance company and authorization to record an application before National Housing Bank.
  • Certificate issued by the registered professionals regarding the criterion of minimum net owned fund of INR 10 crore.
  • Business Profiles of Managing Director, Directors, Chief Executive Officer (CEO), etc.
  • If available, last three years Financial Audit.
  • Certificate of experience of Directors.
  • Certificate of experience of employees.
  • Details of the housing finance company in which directors are associated.

Process of Housing Finance Company Registration in India

The applicant housing finance company must submit a physical certified copy of the application along with the above mentioned necessary documents to National Housing Bank’s Head Office. Further the housing finance company also has to attach a Demand Draft of INR 10, 000 in the name of National Housing Bank (NHB) payable at New Delhi.

Post-Incorporation Formalities


Conditions Regarding issuance of Housing Finance Company Registration License

 

  • When Housing Finance Company Registration application is submitted, National Housing Bank will examine the application and will provide a Certificate of Registration (CoR) after the authorities at National Housing Bank has conducted appropriate background check and if the applicant company satisfies the followings conditions as per the provisions of sub-section (4) of section 29 A of the National Housing Bank Act, 1987:
  • Housing Finance Company should be in a position to pay its future and present depositors as soon as the depositors claim arises.
  • Housing Finance Companies must not be involved in business activities that will hamper the interest of companies’ present or future depositors.
  • The applicant has to make sure that the housing finance company has better earnings prospects and a good capital structure.
  • After receiving the Certificate of Registrar (CoR), it is the responsibility of the housing finance company to serve the public interest.
  • Some other satisfaction, condition of which in the evaluation of National Housing Bank will be essential to guarantee the commencement or carrying the business in India by a Housing Financing Company will not be prejudiced keeping the depositors interest.

How Banks are Different from Housing Finance Companies

The activities of Housing Finance Companies and Banks are similar as both are associated with making ventures and loaning, though there are some contrasts given below:

  • Housing Finance Companies cannot accept request stores;
  • Housing Finance Companies are not allowed to frame some portion of the settlement and payment system and cannot provide self drawn checks;
  • In disparity to banks, deposit insurance feature of deposit insurance and credit guarantee conglomerate is not available to contributors of Housing Finance Companies.

Conclusion

Housing Finance Companies cannot commence business of accommodating funds without obtaining a CoR (certificate of Registration) from National Housing Bank, if a company is operating housing finance business without Housing Finance Company Registration is an offence under the provisions of National Housing Bank Act, 1987. A Housing Finance Company is type of NBFC (Non-Banking Financial Company which is solely involved in the business of ‘Financing of Acquisition or Construction of Houses.

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