The Reserve Bank of
India (RBI) has warned banks against disbursing housing loans directly to the
developers / promoters without taking into consideration the stage of
construction under special schemes such as the 80:20 or 75:25 or 10:80:10 plan. This, RBI warns, could lead
to diversion of funds by the developer resulting in losses for the retail
customers.
These are specialised
schemes where the home buyer pays 20 % or 25% of the cost of the house upfront
and the remaining portion is paid after a few years at the time possession.
Chennai based a
senior banker who did not want to be quoted said, “Developers or promoters are
contracting finance at individual rates through these schemes. And the
developers are paying the interest on behalf of the customers until the
building is constructed so there is no risk.” In some other schemes, the banks
/ housing finance companies will charge the interest portion meant to have collected during the
construction period after the
construction is completed, by charging a higher interest rate.
Many banks have
introduced certain innovative home loan schemes in association with developers
/ or builders whereby upfront disbursal of sanctioned individual housing loans
to the builders without linking the disbursals to various stages of
construction of housing project, interest /EMI on the housing loan availed of
by the individual borrower being serviced by the builders / promoters during
the construction period / or specified period, etc. This often includes signing
of tripartite agreements between the
bank, the builder and
the buyer of the housing unit.
These loan products
are popularly known by various names such as 80:20 and 75:25 schemes.
Mr. Rajeev Talwar,
Executive Director, DLF Ltd, said, “Not all projects of the developers /
promoters are under these schemes and even if they are, it is completed as per
the agreements. Builders / promoters are keen to complete the project &
hand over the homes to the investors.”
In view of the higher
risks associated with such lump sum disbursal of sanctioned home loans &
customer suitability issues, banks are
advised that
disbursal of home loans sanctioned to individuals should be closely linked to
the stages of construction of the housing project / or houses and upfront
disbursal should not be made in cases of incomplete / or under-construction /
or green field housing projects.
“Such home loan
products are likely to expose the banks as well as their housing loan borrowers
to additional risks, e.g, in case of disputes between individual borrowers and
developers / or builders, default / or delayed payment of interest / or EMI by
the developer / or builder during the agreed period on behalf of the borrower,
non-completion of the project on time, etc,” RBI said in a circular.
The central bank
RBI has cautioned that any delayed
payments by developers / or builders on behalf of individual borrowers to banks
may lead to lower credit rating / or scoring of such borrowers by credit
information companies (CICs) as information about servicing of loans gets
passed on to the CICs on a regular basis.
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