The Hindu : Karnataka / Bangalore News : RBI gets tough on lending housing loans

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Monday, Dec 01, 2008
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Karnataka

Karnataka - Bangalore

RBI gets tough on lending housing loans

B.S. Ramesh

Banks to check if the loan sought is for authorised structure
Architect must certify that the built-up property is strictly as per sanctioned plan

BANGALORE: The going has just got tough for those who thought that obtaining housing loans is much easier from district, State and Central cooperative banks than from the nationalised banks and other financial institutions. The Reserve Bank of India (RBI) on Friday directed these banks and financial institutions (FIs) to check whether the housing loan they have sanctioned is for an authorised or unauthorised structure.

The RBI has issued the direction after the Delhi High Court, in a writ petition by Kalyana Sansthe Welfare Organisation versus Union, passed orders relating to housing loans.

The court had directed that “henceforth, banks will check whether the loan sought for is for authorised structure or an unauthorised structure and the banks will obtain an undertaking on an affidavit from the parties seeking such loans that the building is constructed as per sanctioned building plans. Banks shall also ensure that the sanctioned building plans are attached with the undertaking. Let necessary directions be issued in this regard either by the Ministry of Banking or the Reserve Bank of India”.

The court had also set up a monitoring committee regarding issues relating to unauthorised construction, misuse of properties and encroachment on public land. The committee had made several recommendations as under:

Housing Loan

In cases where the applicant owns a plot/land and approaches the banks/FIs for a credit facility to construct a house, a copy of the sanctioned plan by competent authority in the name of a person applying for such credit facility must be obtained by the banks/FIs before sanctioning the home loan.

An affidavit-cum-undertaking must be obtained from the person applying for such credit facility that he shall not violate the sanctioned plan, construction shall be strictly as per the sanctioned plan and it shall be the sole responsibility of the executant to obtain completion certificate within three months of completion of construction, failing which the bank shall have the power and the authority to recall the entire loan with interest, costs and other usual bank charges.

An architect appointed by the bank must also certify at various stages of construction of building that the construction of the building is strictly as per sanctioned plan and shall also certify at a particular point of time that the completion certificate of the building issued by the competent authority has been obtained.

Constructed property

In cases where the applicant approaches the banks/FIs for a credit facility to purchase a built up house/flat, it should be mandatory for him to declare by way of an affidavit-cum-undertaking that the built up property has been constructed as per the sanctioned plan and/or building bylaws and as far as possible has a completion certificate also.

An architect appointed by the bank must also certify before disbursement of the loan that the built up property is strictly as per sanctioned plan and/or building bylaws.

The committee has made it clear that no loan should be given to unauthorised properties. Loans can be given only if such structures have been regularised and development and other charges paid.

Loans, it has said, should be given for properties meant for residential use. However, if an applicant intends to use it for commercial purposes and declares so while applying for loan, his application should not be considered.

The RBI says though the above instructions were issued in the context of a writ petition in the Delhi High Court, all banks and FIs are advised to strictly comply with the above directions with immediate effect.

It said the monitoring committee has clarified that since agricultural land is outside the limit of the gram panchayats and municipal councils and as these authorities neither sanction plans nor issue completion certificates for farmhouses constructed by the farmers on the agricultural land, the directions will not apply to such situations. In all such cases, local rules will apply.

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