MASTER CIRCULAR ON HOUSING LOANS – RBI DIRECTIONS
ISSUED ON 01-07-2015
RBI/2015-16/7
DCBR.BPD.(PCB) MC No.9/09.22.010/2015-16
DCBR.BPD.(PCB) MC No.9/09.22.010/2015-16
July 1, 2015
The Chief Executive Officers
All Primary (Urban) Co-operative Banks
All Primary (Urban) Co-operative Banks
Dear Sir/ Madam,
Master Circular- Finance for Housing Schemes - UCBs
Please refer to our Master Circular
UBD.BPD.(PCB).MC.No.2/09.22.010/2014-15 dated July 1, 2014 on the
captioned subject (available at RBI websitehttps://rbi.org.in/). The enclosed Master
Circular consolidates and updates all the instructions / guidelines on the
subject issued up to June 30, 2015 as listed in the Appendix.
Yours faithfully
(Suma Varma)
Principal Chief General Manager
Principal Chief General Manager
1.1 The role of primary (urban) co-operative banks (UCBs) in providing
housing finance has been reviewed from time to time. These banks, with their
vast network, occupy a very strategic position in the financial system and have
an important role to play in providing credit to the housing sector. Further,
housing finance to specified categories up to prescribed limits is treated as
priority sector lending, and the need for UCBs providing credit to priority
sector has come to be increasingly recognised consistent with the social
objectives placed before the banking system.
1.2 Therefore, with a view to enabling the UCBs to play a more positive
role in providing finance for housing schemes, particularly to the weaker
sections of the community, these banks are permitted to grant loans for housing
schemes up to certain limits from their own resources subject to the guidelines
detailed hereunder.
1.3 Bigger banks that have large surplus resources may undertake larger
lending for housing, as this will provide a remunerative avenue for investment
of their surplus funds.
1.4 Wherever banks are still required to obtain special permission of the
Registrar for financing housing societies, it is suggested that these banks
should obtain general permission to finance housing societies subject to such
terms and conditions as may be prescribed for the purpose.
UCBs may grant loans to the following categories of borrowers:
i. Individuals and co-operative / group housing societies.
ii. Housing boards undertaking housing projects or schemes for economically
weaker sections (EWS), low income groups (LIG) and middle income groups (MIG).
iii. Owners of houses / flats for extension and up-gradation, including
major repairs.
The borrowers in the above categories will be eligible for finance for the
following types of housing schemes:
(a) Construction / purchase of houses / flats by individuals
(b) Repairs, alterations and additions to houses / flats by individuals
(c) Schemes for housing and hostels for scheduled castes and scheduled
tribes
(d) Under slum clearance schemes - directly to the slum dwellers on the
guarantee of the Government, or indirectly through Statutory Boards established
for this purpose
(e) Education, health, social, cultural or other institutions / centers
which are part of a housing project and considered necessary for the
development of settlements or townships
(f) Shopping centers, markets and such other centers catering to the day to
day needs of the residents of the housing colonies and forming part of a
housing project
Finance provided by the UCBs to the eligible categories of borrowers for
eligible housing schemes will be subject to the following terms and conditions:
(i) UCBs, based on their commercial judgment and other prudential business
considerations, with the approval of their Board of Directors, are free to
identify the eligible borrowers, decide margins and grant housing loans
depending upon the repaying capacity of borrowers.
(ii) Tier-I UCBs are permitted to extend individual housing loans up to a
maximum of ₹ 30 lakh per beneficiary of a dwelling unit and Tier II
UCBs (UCBs other than Tier I) to extend individual housing loans up to a
maximum of ₹ 70.00 lakh per beneficiary of a dwelling unit subject to
extant prudential exposure limits.
(iii) The maximum loan should not exceed 15 percent of capital funds of the
bank in case of individual borrowers and 40 per cent of the capital funds in
case of group of borrowers. The capital funds for the purpose shall include
both Tier I Capital and Tier II capital.
* Tier I UCBs are categorised as under:
- Banks having deposits below ₹100 crore operating in a
single district
- Banks with deposits below ₹100 crore operating in
more than one district will be treated as Tier I provided the branches are in
contiguous districts and deposits and advances of branches in one district
separately constitute at least 95% of the total deposits and advances
respectively of the bank and
- Banks with deposits below ₹100 crore, whose
branches were originally in a single district but subsequently, became
multi-district due to reorganization of the district
Deposits and advances as referred to in the above definition may be
reckoned as on 31st March of the immediate preceding financial year.
Banks may, with the approval of their Boards, determine the rate of
interest, keeping in view the size of accommodation, degree of risk and other
relevant considerations.
With effect from June 26, 2012 it has been decided that UCBs will not be
permitted to charge foreclosure charges / prepayment penalties in home loans on
floating interest rate basis.
Banks may formulate, with the approval of their Boards, transparent policy
for charging penal interest rates to be levied for reasons such as default in
repayment, non-submission of financial statements, etc. The policy should be
governed by well accepted principles of transparency, fairness, incentive to
service the debt and due regard to genuine difficulties of customers.
(i) UCBs may secure housing loans either
(a) by mortgage of property, or
(b) by government guarantee where forthcoming, or
(c) by both.
(ii) Where this is not feasible, banks may accept security of adequate
value in the form of LIC policies, Government Promissory Notes, shares /
debentures, gold ornaments or such other security as they deem appropriate.
(i) Housing loans may be repayable within a maximum period of 20 years,
including moratorium or repayment holiday.
(ii) The moratorium or repayment holiday may be granted
(a) at the option of the beneficiary, or
(b) till completion of constructions, or 18 months from the date of
disbursement of first instalment of the loan, whichever is earlier.
(i) The instalments should be fixed on a realistic basis taking into
account the repaying capacity of the borrower.
(ii) In order to make housing finance affordable, banks may consider fixing
the instalments on a graduated basis, if there is reasonable expectation of
growth in the income of the borrower in the coming years. Graduated basis means
fixing lower repayment instalments in the initial years and gradually
increasing the instalment amount in subsequent years coinciding with expected
increase in income in subsequent years.
4.7.1 The exposure of UCBs to housing, real estate and commercial real
estate loans would be limited to 10 per cent of their total assets. The above
ceiling of 10 per cent of total assets can be exceeded by an additional limit
of 5 per cent of total assets for the purpose of grant of housing loans to
individuals up to ₹ 25 lakh, which is
covered under priority sector.
4.7.2 The total assets may be reckoned based on the audited balance sheet
as on March 31 of the preceding financial year. For reckoning total assets,
losses, intangible assets, contra items like bills receivables etc. would be
excluded.
4.7.3 The exposure should take into account both fund based and non-fund
based facilities.
4.7.4 Working capital loans given by UCBs against hypothecation of
construction materials provided to the contractors who undertake comparatively
small construction on their own without receiving advance payments as provided
for in paragraph 7 of this circular is exempted from the prescribed limit.
4.7.5 Finance extended to the eligible category of borrowers mentioned in
paragraph 2 above will only be eligible to be treated as housing finance. While
the purpose of the loan shall determine whether the loans granted against the
security of immovable property need to be classified as real estate loans, the
source of repayment will determine whether the exposure is against commercial
real estate. For classification of such loans as Real Estate / Commercial Real
Estate, UCBs may be guided by the instructions contained in Annex 1. As loans to the residential housing projects under
the Commercial Real Estate (CRE) Sector exhibit lesser risk and volatility than
the CRE Sector taken as a whole, it has been decided to carve out a separate
sub-sector called ‘Commercial Real Estate–Residential Housing’ (CRE-RH) from
the CRE Sector. CRE-RH would consist of loans to builders/developers for
residential housing projects (except for captive consumption) under CRE
segment. Such projects should ordinarily not include non-residential commercial
real estate. However, integrated housing projects comprising some commercial
space (e.g. shopping complex, school, etc.) can also be classified under
CRE-RH, provided that the commercial area in the residential housing project
does not exceed 10% of the total Floor Space Index (FSI) of the project. In
case the FSI of the commercial area in the predominantly residential housing
complex exceeds the ceiling of 10%, the project loans should be classified as
CRE and not CRE-RH.
4.7.6 UCBs are not allowed to exceed the limit prescribed for grant of
housing, real estate, commercial real estate loans to the extent of funds
obtained from higher financing agencies and refinance from National Housing
Bank.
5.1 UCBs may extend additional finance to carry out alterations, additions,
repairs to houses / flats already financed by them subject to repayment
capacity of borrowers.
5.2 In the case of individuals who might have raised funds for construction
/ acquisition of accommodation from other sources and need supplementary
finance, banks may extend credit after obtaining pari passu or
second mortgage charge over the property mortgaged in favour of other lenders
and / or against such other security as they may deem appropriate after due
assessment of aggregate repayment capacity of borrowers.
5.3 UCBs may also extend need-based credit up to a maximum of ₹ 2.00 lakh in rural and semi-urban areas and ₹5.00 lakh in urban areas
to the owner of a house / flat only for repairs, additions, alterations, etc.,
irrespective of whether the house / flat is owner occupied or tenant occupied,
after obtaining such security as the banks may deem appropriate. They should
satisfy themselves regarding the estimated cost of repairs, additions, etc.
having regard to the extent of such repairs or additions, materials to be used,
cost of labour and other charges and after obtaining certificate/s from
qualified engineers / architects in respect thereof, considered necessary.
5.4 The terms and conditions relating to margin, interest rates, repayment
period etc. in respect of additional / supplementary finance may be same as
indicated in respect of loans for construction / acquisition.
6.1 UCBs may extend loans to housing boards within their States. The rate
of interest to be charged on the loans to such boards may be fixed at the
discretion of the banks.
6.2 While extending loans to housing boards, banks may not only keep in
view the past performance of the housing boards in the matter of recovery from
the beneficiaries but should also stipulate that the boards will ensure prompt
and regular recovery of loan instalments from the beneficiaries.
7.1 Builders / contractors generally require huge funds, take advance
payments from the prospective buyers or from those on whose behalf construction
is undertaken and, therefore, may not normally require bank finance for the
purpose. Any financial assistance extended to them by primary (urban)
co-operative banks may result in dual financing. Banks should, therefore,
normally refrain from sanctioning loans and advances to this category of
borrowers.
7.2 However, where contractors undertake comparatively small construction
work on their own, (i.e. when no advance payments are received by them for the
purpose), banks may consider extending financial assistance to them against the
hypothecation of construction materials, provided such loans and advances are
in accordance with the bye laws of the bank and instructions / directives
issued by the Reserve Bank from time to time.
7.3 Banks should undertake a proper scrutiny of the relevant loan
applications, and satisfy themselves, among other things, about the genuineness
of the purpose, the quantum of financial assistance required, creditworthiness
of the borrower, repayment capacity, etc. and also observe the usual
safeguards, such as, obtaining periodic stock statements, carrying out periodic
inspections, determining drawing power strictly on the basis of the stock held,
maintaining a margin of not less than 40 to 50 percent, etc. They should also
ensure that materials used up in the construction work are not included in the
stock statements for the purpose of determining the drawing power.
7.4 Valuation of land : It has been observed that while financing builders / contractors,
certain banks valued the land for the purpose of security, on the basis of the
discounted value of the property after it is developed, less the cost of
development. This is not in conformity with established norms. In this
connection, it is clarified that UCBs should not extend fund based / non-fund
based facilities to builders / contractors for acquisition of land even as a
part of a housing project. Further, wherever land is accepted as collateral,
valuation of such land should be at the current market price only.
7.5 UCBs may also take collateral security, wherever available. As
construction work progresses, contractors will get paid and such payments
should be applied to reduce the balance in the borrowal accounts. If possible,
banks could perhaps enter into a tripartite agreement with the borrower and his
clients, particularly when no collateral securities are available for such
advances.
7.6 It has been observed that some banks have introduced certain innovative
Housing Loan Schemes in association with developers / builders, e.g. upfront
disbursal of sanctioned individual housing loans to builders without linking
the disbursals to various stages of construction of housing project, interest /
EMI on the housing loan availed of by the individual borrower being serviced by
the builders during the construction period / specified period, etc. In view of
the higher risks associated with such lump-sum disbursal of sanctioned housing
loans and customer suitability issues, UCBs are advised that disbursal of
housing loans sanctioned to individuals should be closely linked to the stages
of construction of the housing project / houses and upfront disbursal should
not be made in cases of incomplete / under-construction / green field housing
projects.
8.1 The following types of loan for housing purposes are eligible for
categorisation under priority sector:
i) Loans up to ₹ 25 lakh to individuals
for purchase / construction of dwelling unit per family (excluding loans
granted by banks to their own employees). Family for this purpose means
and includes the spouse of the member and the children, parents, brothers and
sisters of the member who are dependent on such member, but shall not include
legally separated spouse.
ii) Loans given for repairs to the damaged dwelling units of families up to
₹ 2 lakh in rural and semi-urban areas and up to ₹ 5 lakh in urban and metropolitan areas.
iii) Assistance given to any governmental agency for construction of
dwelling units or for slum clearance and rehabilitation of slum dwellers,
subject to a ceiling of ₹ 5 lakh of loan amount
per dwelling unit.
iv) Assistance given to a non-governmental agency approved by the NHB for
the purpose of refinance for construction / reconstruction of dwelling units or
for slum clearance and rehabilitation of slum dwellers, subject to a ceiling of
loan component of ₹ 10 lakh per dwelling
unit for loans sanctioned on and after May 18, 2012.
8.2 Investments made by UCBs in bonds issued by NHB / HUDCO on or after
April, 1, 2007 shall not be eligible for classification under priority sector
lending.
9.1 A number of cases have come to the notice of Reserve Bank, where
unscrupulous persons have defrauded the banks by obtaining multiple bank
finance against the same property by preparing a number of sets of the original
documents and submitting the same to various banks for obtaining housing
finance. Similarly the salary certificates of employees of certain public
sector undertakings were fabricated, so as to match the requirement of banks
for availing higher amounts of loan. The estimates given were also on the
higher side, so as to avoid contribution of margin money by the borrowers.
Such frauds could take place on account of laxity on the part of the bank
officials to follow the laid down procedures for verifying the genuineness of
the documents submitted by borrowers independently through their own advocates
/ solicitors. Banks should, therefore, take due precaution while accepting
various documents.
9.2 Banks would need to satisfy themselves that loans extended by them are
not for unauthorized construction or for misuse of properties / encroachment on
public land. For this purpose, they should ensure strict compliance with the
procedure laid down in Annex 2 .
9.3 In a case which came up before the Hon'ble High Court of Judicature at
Bombay, the Hon'ble Court observed that the bank granting finance to housing /
development projects should insist on disclosure of the charge / or any other
liability on the plot, in the brochure, pamphlets etc., which may be published
by developer / owner inviting public at large to purchase flats and properties.
The Court also added that this obviously would be part of the terms and
conditions on which the loan may be sanctioned by the bank. Keeping in view the
above observations, while granting finance for eligible housing schemes, UCBs
are advised to stipulate as part of terms and conditions that:
(a) The builder / developer shall disclose in the pamphlets / brochures
etc., the name(s) of the bank(s) to which the property is mortgaged.
(b) The builder / developer would append the information relating to
mortgage while advertising for a particular scheme in newspapers / magazines
etc.
(c) The builder / developer would indicate in the pamphlets / brochures
that he would provide No Objection Certificate (NOC) / permission of the
mortgagee bank for sale of flats / property if required.
UCBs are also advised to ensure compliance of the above terms and
conditions. Funds should not be released unless the builder / developer
fulfills the above requirements.
The
Bureau of Indian Standards (BIS) has formulated a comprehensive building Code
namely National Building Code (NBC) of India 2005, providing guidelines for regulating
the building construction activities across the country. The Code contains all
the important aspects relevant to safe and orderly building development such as
administrative regulations, development control rules and general building
requirements; fire safety requirements; stipulations regarding materials,
structural design and construction (including safety); and building and
plumbing services. Adherence to NBC will be advisable in view of the importance
of safety of buildings especially against natural disasters. Banks' boards may
consider this aspect for incorporation in their loan policies. Further
information regarding the NBC can be accessed from the website of Bureau of
Indian Standards (http://www.bis.org.in/).
Definition of Commercial Real Estate Exposure (CRE)
(vide paragraph 4.7.5)
Real Estate is generally defined as an immovable asset - land (earth space)
and the permanently attached improvements to it. Income-producing real estate
(IPRE) is defined in para 226 of the Basel II Framework as under :
"Income-producing real estate (IPRE) refers to a method of providing
funding to real estate (such as, office buildings to let, retail space,
multifamily residential buildings, industrial or warehouse space, and hotels)
where the prospects for repayment and recovery on the exposure depend primarily
on the cash flows generated by the asset. The primary source of these cash
flows would generally be lease or rental payments or the sale of the asset. The
borrower may be, but is not required to be, an SPE (Special Purpose Entity), an
operating company focused on real estate construction or holdings, or an
operating company with sources of revenue other than real estate. The
distinguishing characteristic of IPRE versus other corporate exposures that are
collateralised by real estate is the strong positive correlation between the
prospects for repayment of the exposure and the prospects for recovery in the
event of default, with both depending primarily on the cash flows generated by
a property".
2. The Income Producing Real Estate (IPRE) is synonymous with Commercial
Real Estate (CRE). From the definition of IPRE given above, it may be seen that
for an exposure to be classified as IPRE / CRE, the essential feature would be
that the funding will result in the creation / acquisition of real estate (such
as, office buildings to let, retail space, multifamily residential buildings,
industrial or warehouse space, and hotels) where the prospects for repayment
would depend primarily on the cash flows generated by the asset. Additionally,
the prospect of recovery in the event of default would also depend primarily on
the cash flows generated from such funded asset which is taken as security, as
would generally be the case. The primary source of cash flow (i.e. more than
50% of cash flows) for repayment would generally be lease or rental payments or
the sale of the assets as also for recovery in the event of default where such
asset is taken as security.
3. In certain cases where the exposure may not be directly linked to the
creation or acquisition of CRE but the repayment would come from the cash flows
generated by CRE. For example, exposures taken against existing commercial real
estate whose prospects of repayments primarily depend on rental / sale proceeds
of the real estate should be classified as CRE. Other such cases may include ;
extension of guarantees on behalf of companies engaged in commercial real
estate activities, corporate loans extended to real estate companies etc.
4. It follows from the definition at para 2 and 3 above that if the
repayment primarily depends on other factors such as operating profit from
business operations, quality of goods and services, tourist arrivals etc., the
exposure would not be counted as Commercial Real Estate.
5. UCBs should not extend finance for acquisition of land even if it is
part of a project. However, finance can be granted to individuals for purchase
of a plot, provided a declaration is obtained from the borrower that he intends
to construct a house on the said plot, within such period as may be laid down
by the banks themselves.
Simultaneous Classification of CRE into other Regulatory Categories
6. It is possible for an exposure to get classified simultaneously into
more than one category, real estate, CRE, infrastructure etc as different classifications
are driven by different considerations. In such cases, the exposure would be
reckoned for regulatory / prudential exposure limit, if any, fixed by RBI or by
the bank itself, for all the categories to which the exposure is assigned. For
the purpose of capital adequacy, the largest of the risk weights applicable
among all the categories would be applicable for the exposure. The rationale
for such an approach is that, while at times certain classifications /
categorizations could be driven by socio-economic considerations and may be
aimed at encouraging flow of credit towards certain activities, these exposures
should be subjected to appropriate risk management / prudential / capital
adequacy norms so as to address the risk inherent in them. Similarly, if an
exposure has sensitivity to more than one risk factor it should be subjected to
the risk management framework applicable to all the relevant risk factors.
7. In order to assist banks in determining as to whether a particular
exposure should be classified as CRE or not, some examples based on the
principles described above are given below. Based on the above principles and
illustrations given, banks should be able to determine, whether an exposure not
included in the illustrative examples is a CRE or not and should record a
reasoned note justifying the classification.
Illustrative Examples
A. Exposures which should be classified as CRE
1. Loans extended to builders for construction of any property which is
intended to be sold or given on lease (e.g. loans extended to builders for
housing buildings, hotels, restaurants, gymnasiums, hospitals, condominiums,
shopping malls, office blocks, theatres, amusement parks, cold storages,
warehouses, educational institutions, industrial parks) In such cases, the
source of repayment in normal course would be the cash flows generated by the
sale / lease rentals of the property. In case of default of the loan, the
recovery will also be made from sale of the property if the exposure is secured
by these assets as would generally be the case.
2. Loans for Multiple Houses intended to be rented out
The housing loans extended in cases where houses are rented out need to be
treated differently. If the total number of such units is more than two, the
exposure for the third unit onwards may be treated as CRE Exposure as the
borrower may be renting these housing units and the rental income would be the
primary source of repayment.
3. Loans for integrated Township Projects
Where the CRE is part of a big project which has small non-CRE component,
it will be classified as CRE exposure since the primary source of repayment for
such exposures would be the sale proceeds of buildings meant for sale.
4. Exposures to Real Estate Companies
In some cases exposure to real estate companies is not directly linked to
the creation or acquisition of CRE, but the repayment would come from the cash
flows generated by Commercial Real Estate. Such exposures illustratively could
be :
* Corporate Loans extended to these companies
* Investments made in the debt instruments of these companies
* Extension of guarantees on behalf of these companies
5. General Purpose loans where repayment is dependent on real estate prices
Exposures intended to be repaid out of rentals / sale proceeds generated by
the existing CRE owned by the borrower, where the finance may have been
extended for a general purpose.
B. Exposures which may not be classified as CRE
1. Exposures to entrepreneurs for acquiring real estate for the purpose of
their carrying on business activities, which would be serviced out of the cash
flows generated by those business activities. The exposure could be secured by
the real estate where the activity is carried out, as would generally be the
case, or could even be unsecured.
a) Loans extended for construction of a cinema theatre, establishment of an
amusement park, hotels and hospitals, cold storages, warehouses, educational
institutions, running haircutting saloons and beauty parlours, restaurant,
gymnasium etc. to those entrepreneurs who themselves run these ventures would
fall in this category. Such loans would generally be secured by these
properties.
For instance, in the case of hotels and hospitals, the source of repayment
in normal course would be the cash flows generated by the services rendered by
the hotel and hospital. In the case of a hotel, the cash flows would be mainly
sensitive to the factors influencing the flow of tourism, not directly to the
fluctuations in the real estate prices. In the case of a hospital, the cash
flows in normal course would be sensitive to the quality of doctors and other
diagnostic services provided by the hospital. In these cases, the source of
repayment might also depend to some extent upon the real estate prices to the
extent the fluctuation in prices influence the room rents, but it will be a
minor factor in determining the overall cash flows. In these cases, however,
the recovery in case of default, if the exposure is secured by the Commercial
Real Estate, would depend upon the sale price of the hotel / hospital as well
as upon the maintenance and quality of equipment and furnishings.
The above principle will also be applicable in the cases where the
developers / owners of the real estate assets (hotels, hospitals, warehouses,
etc.) lease out the assets on revenue sharing or profit sharing arrangement and
the repayment of exposure depends upon the cash flows generated by the services
rendered, instead of fixed lease rentals.
b) Loans extended to entrepreneurs, for setting up industrial units will
also fall in this category. In such cases, the repayment would be made from the
cash flows generated by the industrial unit from sale of the material produced
which would mainly depend upon demand and supply factors. The recovery in case
of default may partly depend upon the sale of land and building if secured by
these assets.
Thus, it may be seen that in these cases the real estate prices do not
affect repayment though recovery of the loan could partly be from sale of real
estate.
2. Loans extended to a company for a specific purpose, not linked to a real
estate activity, which is engaged in mixed activities including real estate
activity.
For instance, a company has two divisions. One division is engaged in real
estate activity, and other division is engaged in power production. An
infrastructure loan, for setting up of a power plant extended to such a
company, to be repaid by the sale of electricity would not be classified as
CRE. The exposure may or may not be secured by plant and machinery.
3. Loans extended against the Security of future rent receivables
A few banks have formulated schemes where the owners of existing real
estate such as shopping malls, office premises, etc. have been offered finance
to be repaid out of the rentals generated by these properties. Even though such
exposures do not result in funding / acquisition of commercial real estate, the
repayment might be sensitive to fall in real estate rentals and such exposures
should be classified as CRE. However, if there are certain in built safety
conditions which have the effect of delinking the repayments from real estate
price volatility like, the lease rental agreement between the lessor and lessee
has a lock in period which is not shorter than the tenor of loan and there is
no clause which allows a downward revision in the rentals during the period
covered by the loan banks can classify such exposures as non CRE. Banks may,
however, record a reasoned note in all such cases.
4. Credit facilities provided to construction companies which work as
Contractors
The working capital facilities extended to construction companies working
as contractors, rather than builders, will not be treated as CRE exposures
because the repayment would depend upon the contractual payments received in
accordance with the progress in completion of work.
5. Financing of acquisition / renovation of self-owned office / company
premises
Such exposures will not be treated as CRE exposures because the repayment
will come from company revenues. The exposures to industrial units towards
setting up of units or projects and working capital requirement, etc. would not
be treated as CRE Exposures.
Direction of the Hon'ble High Court of Delhi -
Procedure for ensuring the loan sought is for authorised structure
Procedure for ensuring the loan sought is for authorised structure
(vide paragraph 9.2)
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 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 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.
C. 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. No loan should 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.
E. The above directions will not be applicable to construction of
farmhouses on agricultural land since the agricultural land is outside the
limit of Grampanchayats and Municipal Councils and as these authorities neither
sanction plans nor issue completion certificates for farmhouses constructed by
the farmers on the agricultural land. In all such cases, local rules will
apply.
Direction of the
Hon'ble High Court of Delhi -
Procedure for ensuring the loan sought is for authorised structure
Procedure for ensuring the loan sought is for authorised structure
(vide paragraph 9.2)
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 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 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.
C. 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. No loan should 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.
E. The above directions will not be applicable to construction of
farmhouses on agricultural land since the agricultural land is outside the
limit of Grampanchayats and Municipal Councils and as these authorities neither
sanction plans nor issue completion certificates for farmhouses constructed by
the farmers on the agricultural land. In all such cases, local rules will
apply.
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