Calcutta, Aug 12: Private-sector housing finance companies (HFCs) may soon be allowed to raise deposits from non-resident Indians, a funding route so far restricted to institution-sponsored HFCs. The Reserve Bank of India has sought the finance ministry's opinion on permitting NRI funds to flow to the private players as well.

The central bank has also sought the ministry's permission for allowing the private HFCs to extend housing loans to NRIs.

Top banking sources told The Financial Express

"The move is being considered to provide a level-playing field to the private sector operators, who are at a disadvantage under the present norms."

In fact, for quite some time private sector HFCs such as Dewan Housing, Global Housing, Weizmann Housing Finance and Hometrust Housing Finance have been lobbying the National Housing Bank for permission to tap NRI funds, so that they are offered facilities at par with their "stronger" institutionalised partners like HDFC, LIC Housing, GIC Housing or SBI Home Finance.

The NHB, agreeing with the HFCs, had referred the matter to the RBI.The relaxation, if cleared, will come as a major boost for the housing sector, which has been severely hit by a funds shortage. Housing shortages are estimated at over 32 million units and free flow of NRI funds to the private HFCs is expected to boost "priority-sector" housing.

An industry source said, "The dichotomy is that although NRIs are allowed to deal in properties in India, private- sector HFCs are still barred from soliciting deposits from or extending loans to NRIs."

A top official of a private HFC said: "Unlike the private players, institution-sponsored HFCs often do not feel the need to aggressively hawk for deposits, since they have a big brother to bail them out. LIC Housing, for example, has access to cheap funds from its parent and does not mop up funds through fixed deposits. But it is an entirely different game for us."

Although allowed to tap NRI funds, institution-managed HFCs prefer to operate from within the country, and except HDFC which has set up an office in Dubai, none of the other companies have operations overseas to aggressively tap high-networth NRIs. They have instead targeted the local friends and relatives of the NRIs to mop up deposits.

Such funds are mobilised from the non-resident (external) accounts and HFCs have to furnish periodic statements to the RBI on these transactions. "NRIs have to repay loans in foreign currency, and extension of the facilities to private players can prove to be a forex spinner," sources said.

In a bid to solicit overseas funds, Global Housing, a Mumbai-based private sector HFC, had decided to target West Asia, but the RBI permission never came and the company had to re-orient its strategy to give it a "domestic-focus".

Hometrust Housing Finance, a Calcutta-based firm, also could not entertain requests from loan-applications from NRIs, who showed interest to buy housing units built by sister firm Bengal Ambuja. "Many NRI allotees had come to us for housing loans, but we had to let go the business opportunity," company sources said.

Private HFCs say that once the necessary clearances come, many might also tie-up with the Indian builders, who tap NRI customers by holding road-shows abroad. "Such strategic tie-ups will help in tapping maximum NRI funds. Besides, also on offer will be our efficient customer-friendly services," they add.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.