Harvinder kumar (Company Secretary ) (195 Points)
22 November 2012Dear Professionals,
Kindly let us know that following issues:-
Whether NBFC can venture in real estate business directly, for eg. an NBFC wants to launch real estate business then it is possible as per RBI norms. However, MoA provides provisions in other object clause.
Reply will be greatly appreciated.
Regards,
Harvinder
Vinod Venugopal
(Practice)
(25 Points)
Replied 22 November 2012
Dear Harvinder,
1. As per applicable policy currently in force, NBFCs are not barred from undertaking non-financial activities such as real estate development and construction. However it should be ensured that the ‘Principal Business' of the company always fall within the definition of NBFC as defined in RBI Act 1934. 'Principal Business' for this purpose mean that the financial assets of the NBFC should be greater than 50% of its total assets and income from these financial assets should be greater than 50% of its gross income. Also note that if the NBFC in question is registered as an Asset Finance Company then the above percentages would be 60% instead of 50%.
2. If the MoA provides for real estate business in 'Other Objects' necessary compliance under the Companies Act should be ensured depending on whether the NBFC is registered as a Private company or a Public Company.
Regards,
V.Vinod
Practicing CS
CAclubindia
