The National Housing Bank (NHB) has introduced stricter guidelines for refinancing home loans in under-construction properties. In an order to home financiers, the NHB said it would now provide refinance only for loans where less than half the construction is complete during the first disbursement. This rule specifically applies to loans taken for construction on plots or for building homes on self-owned land, said the order. "In cases where HFCs extend loans to individuals for ongoing construction, refinance from NHB will be available only in respect of loans where not more than one-half of the construction has been completed at the time of disbursement of first tranche of the loan by the HFC," said the NHB order. NHB has also mandated that the stage of construction be clearly verified through a technical evaluation report when the first tranche of the loan is disbursed. HFCs have been instructed to ensure only eligible loans are flagged for NHB refinance. According to sources familiar with the matter, the change was triggered by instances where borrowers were applying for home loans after the construction was already complete, effectively using the loan to monetise the finished property. NHB clarified that such cases should be treated as loans against property (LAP) rather than home loans. Out of the outstanding home loans of ?33.53 lakh crore at the end of September 2024, housing finance companies had a share of ?6.25 lakh crore. The NHB has been steadily tightening regulatory oversight and enforcing stricter compliance norms for HFCs. In December last year, NHB mandated that all HFCs report non-performing asset (NPA) data on the first day of each month, after observing that many lenders were continuing to record collections for the previous month well into the following week. In March, the regulator took further action by reprimanding HFCs for mis-selling insurance policies bundled with home loans. NHB directed HFCs to immediately cease the practice of selling insurance products without clearly disclosing the terms and conditions to borrowers.
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