Definition
Housing Finance Company (HFC)
A Housing Finance Company is an NBFC that primarily provides home loans and related housing finance, now regulated by the RBI.
HFCs specialise in mortgage lending, including home loans, loans against property and developer finance. Regulation of HFCs moved from the National Housing Bank to the RBI in 2019, aligning them more closely with the broader NBFC framework.
Because home loans are long-dated while much HFC funding is shorter-term, HFCs are exposed to asset-liability mismatch risk, a vulnerability highlighted by the DHFL collapse. The RBI prescribes minimum housing-finance asset thresholds and capital norms specific to HFCs.
Related terms
- Loan Against Property (LAP)A loan against property is a secured loan where you mortgage residential or commercial property to raise funds for any purpose.
- Non-Banking Financial Company (NBFC)An NBFC is an RBI-registered financial company that lends and invests but cannot accept demand deposits or offer cheque facilities like a bank.
- NBFC Scale-Based RegulationScale-Based Regulation is the RBI's framework that places NBFCs into Base, Middle, Upper and Top layers, with regulation tightening as size and systemic importance rise.
- Asset-Liability MismatchAn asset-liability mismatch arises when the maturity or repricing profile of a lender's assets differs from that of its liabilities, creating liquidity or interest-rate risk.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.