The National Housing Bank (NHB) has instructed housing finance companies not to include stamp duty, registration, and other documentation charges in the cost of the house or property being financed as the practice will “overstate the realisable value of the residential property.”
In a policy circular issued early this month, the apex housing bank said that different housing finance companies (HFCs) adopted different practices and some HFCs tended to include the registration and other documentation charges in the price of the property though these were not realisable. Inclusion of these charges in the price of the property diluted the Loan-to-Value ratio, the circular said.
At the same time, NHB has said that in cases where the property price did not exceed Rs.10 lakh and in cases where borrowers were from the economically weaker sections and low-income groups, the HFCs could add the registration and documentation charges into the price of the property to calculate the Loan-to-Value ratio.
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The companies have also been instructed that they may, in cases of projects sponsored by the Union government or State authorities, disburse housing loans as per the payment stage prescribed by these authorities though there was an earlier instruction from the apex bank that HFCs should not engage in upfront disbursal of loans, especially in cases of incomplete, under-construction or Greenfield housing projects or houses. However, the housing finance companies have been asked to ensure that these authorities have no history of non-completion of projects.
Meanwhile, the apex housing bank has reiterated that the housing finance companies must ensure transparency in their operations by displaying key aspects of their transactions with their customers. The bank has said that HFCs must clearly display the interest rates, services offered, service charges, time norms for various transactions, and grievance redress mechanism.
The NHB says that HFCs must clearly display the interest rates, services offered, service charges, time norms for various transactions, and grievance redress mechanism