Today's Paper

No bank loan to buildings violating rules

V.S. Palaniappan

Coimbatore: Reserve Bank of India has directed all commercial banks to tighten procedures for extending loans for properties. The objective seems to be to deny loans to unauthorised structures and those which have come up violating building rules.

In its directive while disposing a writ petition, the Delhi High Court had said: "We hereby direct that henceforth banks will check whether the loan sought for is for authorised or unauthorised structure and will obtain an undertaking on an affidavit from the applicants to comply with the building rules besides getting the sanctioned plans along with the undertaking." In this context, the monitoring panel constituted by the Delhi High Court had issued directions for compliance by banks/financial institutions.

In cases where a loan was sought for constructing a property, the funding institutions should obtain a copy of the sanctioned plan by a competent authority in the name of the applicant. An affidavit-cum-undertaking must be obtained from the applicant that he/she shall not violate the sanctioned plan.

It shall be the sole responsibility of the applicant to obtain completion certificate from the competent authority within three months of completion of construction.

Failing which the bank should have the power and the authority to recall the entire loan with interest and other charges. In cases of loans for purchase of built-up houses/flat, it should be mandatory for the applicant to declare by way of an affidavit-cum-undertaking that the property had been constructed as per the sanctioned plan. The architect from the bank should also certify the same before disbursement of the loan. In case of loan for construction the architect should certify compliance to rules at every stage besides ensuring that a completion certificate had been obtained from the competent authority.

The banks have been instructed not to give any loan in respect of properties in unauthorised colonies unless and until they have been regularised. These instructions would come into effect immediately, the circular said.