No upfront disbursal should be made in cases of incomplete/under-construction/green field housing projects
Banks will no longer be allowed lump-sum disbursal of sanctioned housing loans.
The Reserve Bank of India has told the banks that disbursal of sanctioned loan will have to be closely linked to the stages of construction of the housing projects/houses. And, the RBI has also made it clear to them that no upfront disbursal should be made in cases of incomplete/under-construction/green field housing projects.
The RBI diktat comes in view of the higher risks associated with such lump-sum disbursal of sanctioned housing loans.
Banks have tended to join hands with developers/builders to introduce innovative housing loan schemes such as this one — upfront disbursal of sanctioned loans sans any linkage to stages of construction of a housing project. At times, these are done through 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, 75:25 schemes,’’ the RBI said.
“Such housing loan products are likely to expose the banks as well as their home loan borrowers to additional risks in case of disputes between individual borrowers and developers/builders, default/delayed payment of interest/EMI (equated monthly instalment) by the developer/builder during the agreed period on behalf of the borrower and non-completion of the project on time,’’ the RBI said.
“Further, any delayed payments by developers/builders on behalf of individual borrowers to banks might lead to lower credit rating/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.
In cases where bank loans are also disbursed upfront on behalf of their individual borrowers in a lump-sum to builders/developers without any linkage to stages of construction, banks run disproportionately higher exposures with concomitant risks of diversion of funds,’’ the RBI pointed out.
While directing the banks to link disbursal to stages of project construction, the RBI also told them to take into account the customer suitability and appropriateness issues while introducing any kind of product. Further, it said, banks should ensure that the borrowers/customers were made fully aware of the risks and liabilities under such products.