To safeguard the interests of buyers and contain the
fallout of "innovative" housing financing schemes, The Reserve Bank
of India has asked all banks to link the disbursal of home loans according to
the stages of construction.
Because of the higher risks linked with customer
suitability issues and such lump-sum disbursal of sanctioned housing loans,
banks have been advised that the disbursal of housing loans sanctioned to
individuals should be closely related to the stages of construction of the
housing project/houses...,"
Upfront disbursal "should not be made in cases of
incomplete/under-construction/green field housing projects"
The announcement follows the introduction by some
banks of "innovative housing loan schemes" in association with
developers/builders, where upfront disbursal of housing loans is made to
builders without being linked to the various stages of construction.
Also, under such schemes, the interest/EMI on the
housing loan availed of by the individual borrower is serviced by the builder
during the building period. RBI said that “These loan products are popularly
known by names such as 80:20 and 75:25 schemes.
The RBI said such home loan products are expected to
expose banks and their borrowers to additional risks.
The risks consist of disputes between borrowers and
builders; default and delayed payment of interest/EMI by the builder on behalf
of the borrower, and non-completion of the project on time.
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