Housing Scam may hit Properties Under-construction quite badly
Bankers would now exercise greater caution before sanctioning loans for project finance. Several bankers and housing finance executives said the guidelines would become more stringent across-the-board, particularly for project financing. Stung by Housing Loan Scam, banks and housing finance companies will seek additional security and add completion guarantee clauses into agreements before sanctioning loans to developers.
Banks may take legal mortgage or equitable mortgage instead of land deeds or title. Such mortgages would allow a bank to repossess and sell land and any building being constructed on it should problems arise.The banks may ask for additional security when giving developers loans.
Bankers said so-called ’10-90′ projects launched by many builders in association with banks and housing finance companies are already facing problems after the Reserve Bank of India capped the loan-to-value (LTV) ratio at 80 last month for all home loans. Bankers said lending for properties under construction, for both builders and home buyers, could be hit quite badly.
At present, banks or housing finance companies provide builders loan even if the builder did not have all the building permits. This practice is unlikely to continue.Sometimes, the builder would get loans at a lower interest at the very outset, if they promised enough customers. The builder just had to ensure that the financial institution had enough customers for the smooth progress of the project.
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