"HFCs should be considered as a separate sector for the purpose of sectoral caps proposed for investments by mutual fund schemes. More so, as the HFCs lend at 10.5 per cent per annum for home loans to the masses and cannot compete with NBFCs," said Dr. Rana Kapoor, senior vice-president of The Associated Chambers of Commerce and Industry of India (ASSOCHAM) in a communication to the finance minister, Mr P. Chidambaram.

"The low interest housing loans' disbursal from HFCs would result in increased demand for new homes, thus aiding creation of additional housing stock in the country thereby reducing the shortage of urban housing stock," said Dr. Kapoor. "Besides, the increased demand for new homes would not only support various sectors like cement, steel and other construction related ancillary industries but will also boost the employment scenario."

For the purpose of sector classification, the Securities and Exchange Board of India (SEBI) has clubbed HFCs with NBFCs and other finance companies.

As per the ministry of housing and urban poverty alleviation, India faces urban housing shortage of over 26 million units. Besides, mortgage to gross domestic product (GDP) penetration in India is a meagre nine per cent as against 15-30 per cent in its peer group of south-east Asia.

In view of the shortage of the housing stock and low mortgage penetration, the Reserve Bank of India (RBI) has qualified housing loans as one of the priority sector industry.

In its communication to the finance minister, ASSOCHAM has recommended that HFCs with their sole focus on housing finance should be treated at par with banks for priority sector lending.

ASSOCHAM has also suggested that indirect finance by banks to HFCs for onward lending to individuals up to Rs 25 lakhs in metropolitan centres with population over 10 lakhs and Rs 15 lakhs at other centres for purchase/construction of a dwelling unit per family, excluding loans sanctioned to the company's own employees, should qualify under priority sector lending for banks.

"We have also recommended that interest subsidy be provided to a first time buyer for loans up to Rs 25 lakh to enable affordable home ownership," said Mr D.S. Rawat, national secretary general of ASSOCHAM. "Besides, to promote women empowerment and encourage women folk for home ownership we have recommended to provide subsidy to female buyers for loans up to Rs 25 lakhs."

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