SEBI hikes mutual funds’ exposure limit to housing finance companies

The Securities and Exchange Board of India (SEBI) has increased the sectoral investment limit for mutual funds in housing finance companies (HFCs) in a bid to boost fund flows to the housing and real estate sector.

SEBI has allowed mutual funds (asset management companies) to invest an additional 10 per cent in housing finance companies over and above the 30 per cent sectoral cap for such investment. This, however, should not exceed 10 per cent of the corpus of any schemes in which the MF/AMC is investing, SEBI said in a circular issued today

At present, the guidelines issued on prudential limit for sectoral exposure in debt-oriented mutual fund schemes put a limit of 30 per cent at the sector level.

''However, in light of the important role played by the housing finance companies (HFCs) in the housing sector, it has been decided that an additional exposure not exceeding 10 per cent of net assets of the scheme would be allowed only to HFCs as part of financial services sector for prudential limits in debt oriented schemes,'' SEBI said.

Mutual funds/AMCs should ensure that total exposure of debt schemes of mutual funds in a particular sector (excluding investments in bank CDs, CBLO, G-Secs, T-Bills and AAA rated securities issued by public financial institutions and public sector banks) should not exceed 30 per cent of the net assets of the scheme.

However, mutual funds should ensure that the additional investments are made in securities issued by HFCs that are rated AA and above and that these HFCs are registered with the National Housing Bank (NHB) and the total investment/ exposure in HFCs does not exceed 30 per cent of the net assets of the particular scheme.