J. Malarvizhi

Most financial institutions tolerate some amount of deviation in site plans

Reserve Bank guidelines put the responsibility on banks to verify

“Unauthorised constructions are coming down”

CHENNAI: In the race to provide home loans in a competitive market, some finance companies and banks have turned lax in checking whether buildings are compliant with norms.

Valuers, who visit sites to determine the amount of deviation in loan request sites and plans, say that financial institutions have their ‘tolerance limits’. “Some allow maybe 10 per cent deviation. Some institutions will tolerate up to 30 per cent, a very few even higher,” claimed a valuer, who has to inspect up to 20 cases a day for various banks.

However, housing finance representatives of leading financial firms insist that they do not grant loans without ensuring that the necessary approval has been granted.

The Reserve Bank of India Guidelines, issued on March 1, 2006, has put the responsibility on banks to verify if the property in the loan application has obtained the necessary approval. The guidelines had warned commercial banks against granting loans for illegal projects.

A representative of LIC Housing Finance said there were usually minor deviations in most loan applications. There have been instances of unauthorised floors or violations of set back requirements, which valuation engineers bring to the attention of the bank. On a case-by-case basis, the institution takes a decision on whether loans can be granted.

Valuers sometimes find a kitchen that did not find place in the plan. However, such deviations inside the building are easily overlooked. It is external deviations such as higher than permissible Floor Space Index and setback that can hurt the potential borrower’s chances of loan approval.

However, some employees in the housing finance industry concede that even these controls are not as strict as they are made out to be. Unapproved buildings are a significant source of revenue and an inescapable feature of the urban areas, they say.

Financial institutions are more concerned with meeting their targets than upholding the rules, said Gopinatha Rao, former national president, Institute of Valuers.

Matthew Joseph, regional manager, HDFC, believes that the problem of unauthorised construction is coming down.

“With the authorities tightening the screws on deviant builders, the problem of unauthorised has fallen considerably in recent times within the city limits. It is probable that the problem is worse in the suburban areas, where the local body grants approval without proper site examination,” he said.