Thursday, September 24, 2009

Delhi High Court Order and RBI compliance and Directives

RBI/ 2009-10/75
DBOD. No.DIR. (HSG). BC.08 /08.12.01/2009-10 July 1, 2009
09 Aashada , 1931 (Saka)
All Scheduled Commercial Banks
(excluding RRBs)
Dear Sir,
Master Circular on

Clause 12 clearly directs and specifies that OCCUPANCY CERTIFICATE must be obtained from the concerned authorities. Otherwise, the home loans sanctioned MUST BE RECALLED WITH CHARGES.
The Monitoring Committee constituted by the Hon’ble High Court of Delhi regarding Unauthorised Construction, Misuse of Properties and Encroachment on Public Land, has issued the following directions for immediate compliance by the banks/ Financial Institutions.
A. Housing Loan for building construction
i) 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.
ii) 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 3 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.
iii) 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.
B. Housing Loan for purchase of constructed property/ built up property
i) In cases where the applicant approaches the bank/FIs for a credit facility to purchase the 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 bye-laws and as far as possible has a completion certificate also.
ii) 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 bye-laws.
DBOD-MC on Housing Finance-2009
C. Unauthorised colonies
No loan should be given in respect of those properties which fall in the category of unauthorized colonies unless and until they have been regularized and development and other charges paid.
D. Commercial Property
No loan should also be given in respect of properties meant for residential use but which the applicant intends to use for commercial purposes and declares so while applying for loan.

The banks have already initiated action in this regard and have given sufficient time to the borrowers to produce the statutory certificates, failure to do so, will invite, RECALL notices.
The Government of Karnataka has finally penned down the AKRAMA-SAKRAMA Scheme. 50% of the violations and deviation in the residential construction will be regularised in A and B zone and the commercial structures will be regularised by 25% respectively. The penalty is based on the guidance value. The cut off date might be 30-06-2007 or 31-12-2007, 30-06-2008 or 31-12-2008. It has not been clear regarding the cut off date. More than 50% residential and 25% commercial structures will be demolished. This is one time opportunity for violators. Even the Ordinance, if promulgated, has to undergo Judicial scrutiny, as there some PIL is still pending in the Honourable High Court Of karnataka. Main beneficiaries are builders and developers and all those, who have already bought apartments, which have blatantly violated sanctioned building plans and building by-laws. Most of the apartments in Bangalore, does not have COMMENCEMENT CERTIFICATE, which is mandatory and COMPLETION/ OCCUPANCY CERTIFICATE. The Honourable High Court of Karnataka has directed BESCOM AND BWSSB not to provide services, for the buildings, which have violated the sanctioned plans and by laws. The KATHA issued by the local municipal authorities stands automatically canceled and Katha certificate will not convey any right, interest and titles. It is an account with the local municipal administration. Even payment of property taxes, will not in any manner, make the titles clear and marketable, when the by laws are violated. IGNORANCE OF LAW IS NO EXCUSE.
The RBI in its Master circular, has directed all the associate banks to disclose the Mortgage clause to public about the property and the builders. This will enable the buyers to know, whether the property is free from all encumbrances, liens and charges.

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