In an attempt to provide a level field to the banks and housing finance companies, the apex bank, Reserve Bank of India has suggested to regulate housing companies.

Presently, housing finance companies in India are currently regulated by National Housing Bank, which a wholly owned by RBI.

Ownership of NHB will give the government greater say in the boards of housing finance institutions and flexibility to issue directions to meet its priority sector credit objectives.

It is argued that housing finance companies in India need to be regulated. At present, there are no prudential guidelines including capital adequacy requirements for housing finance companies in India.

RBI also thinks that the role of NHB must be diversified and it must be involved in developmental work like mortgage financing, financial advisory services, affordable housing and rural housing.

Explaining the need for intermediation in the sector, an RBI official said, "There is clearly a regulatory arbitrage here. Housing is a priority sector; so many entities are getting into this business by floating housing companies and thereby skirting RBI's stringent prudential guidelines."

The government has earmarked Rs 1,542 crore in the Union budget 2009-10 to buy RBI stake in National Bank for Agriculture and Rural Development (NABARD) and NHB. Presently RBI holds 72.5 percent stake in NABARD.

However, RBI proposal to gain control over housing has met disagreements and awaits government approval.