Housing finance deposits generating good returns for investors

Question: Housing finance companies in India give a relatively good rate of interest to depositors. Are these investments safe and are there adequate regulations to protect the interest of depositors?

ANSWER: The Reserve Bank of India is keeping a watchful eye on housing finance companies and regulations have been tightened recently in respect of maintaining liquid assets against liabilities. Housing finance companies are now required to hold 10 per cent of their public deposits in unencumbered approved securities. Earlier they were required to hold only 6.5 per cent. An important step which has been taken is to provide that these companies can raise deposits from the public upto a maximum of 1.5 times their net owned funds; earlier they could raise upto three times their capital. If housing finance companies already have more than 1.5 times their net owned funds, they are prohibited from accepting fresh public deposits or renewing existing deposits. The regulator has also imposed a limit on the maximum maturity period of a public deposit to five years which earlier was ten years. In case a depositor wishes to withdraw his deposit prematurely, only 50 per cent of the deposit amount or Rs.500,000, whichever is less, can be repaid. The early repayment would not include any interest. The remaining amount of deposit and interest can only be paid as per the rules laid down by the company. However, in case of a medical emergency, premature withdrawal of a higher amount is permitted. It has also been stipulated by the RBI that housing finance companies can only raise deposits if they have a minimum investment grade rating.

Question: With the geopolitical tension in West Asia and elsewhere continuing, will India be able to attract capital from foreign investors to sustain its growth trajectory? Also, are additional jobs likely to be created to meet the demands of the young population?

ANSWER: According to a survey undertaken by a well known international consulting firm, India is considered to be the fifth preferred destination for investment of capital. During the survey, responses were received from over 4,700 CEOs worldwide and they have reported a thirty percentage point increase in optimism in view of the fact that the country has countered the impact of global economic slowdown. This is on account of an increase in Governmental capital expenditure and rise in domestic demand. Further, fiscal consolidation, substantial build up of foreign exchange reserves, and healthier balance sheets of banks and corporates have contributed to the positive outlook. Most of the CEOs surveyed indicated that they would be increasing the work force in India by atleast 5 per cent over the next twelve months, which is in sharp contrast to 2023 when they had indicated a freeze in hiring and reduction in the headcount. The main sectors where there will be increase in employment will be in engineering, infrastructure projects, hospitality and tourism. An expectation of fall in the rate of inflation in the coming weeks has also contributed to the favourable outlook for India.

Question: With generative Artificial Intelligence gaining ground, what will be the technological landscape in 2024 and how will it affect the employment scenario in India?

ANSWER: It is anticipated that in 2024 there will be a shift towards upskilling and reskilling of technical manpower dispelling fears of widespread job displacement. New technologies which will emerge are in the fields of Web 3.0, Metaverse and IoT. AI will play a crucial role in their maturation. Web 3.0 will present the potential for improved security, privacy and personal data control. 5G is set to revolutionize connectivity with fast data transfer which will help interconnected IoT devices. The Metaverse promises benefits in gaming and collaboration. AI will fortify security in Web 3.0, optimize 5G networks, interpret IoT data, and accelerate the development of Metaverse. The integration of AI will therefore augment existing job roles and create new opportunities. A combination of domain expertise and AI skills will be in great demand. In India as well as in other countries, Governments are adapting their regulatory frameworks to address issues in AI ethics, privacy and content authenticity. It is therefore expected that engineers will take the lead in shaping responsible and ethical AI practices in 2024.

H. P. Ranina is a practising lawyer, specialising in tax and corporate laws of India.

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