The decision to relax the investment limit for housing finance companies (HFCs) was taken by Sebi at its board meeting held in October.

"... 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 shall be allowed only to HFCs as part of financial services sector for prudential limits in debt oriented schemes," Sebi said in a circular today.

The total investment in HFCs shall not exceed 30 per cent of the net assets of the scheme.

Sebi said the relaxation would be subject to certain conditions such as that the securities issued by HFCs were rated 'AA' or above. Also, the HFCs should have been registered with the National Housing Bank (NHB).

In October, the market regulator had said the decision to relax investment limit was taken after taking into consideration the important role played by HFCs in fulfilling the social objective of increased home ownership and supporting the economy by creating demand for construction of new homes.

Certain debt mutual fund (MFs) schemes, such as long-term Fixed Maturity Plans (FMPs) are a preferred route for the NBFC (Non-Banking Finance Company) sector to raise medium to long term funds at attractive rates.

Under the regulatory framework, NBFCs include HFCs.