RBI Issues Notification On Disbursal Of Housing Loans

The prolonged difficulties in market conditions have resulted in a rough ride for real estate developers. They are facing hurdles to sell their projects despite sufficient demand in the domestic market. Consequently, real estate players have resorted to offering various schemes to attract buyers. Lucrative schemes with diverse benefits are being offered at the time of booking and after the purchase of property.

One of the most promising and popular schemes in the market has been that of the real estate developers servicing the interest or EMI on a housing loan. In accordance to this scheme, banks, in association with real estate developers disburse upfront loans without linking the disbursal to various stages of construction of the housing project. This scheme can include signing of tripartite agreements between the bank, the real estate developer and the buyer of the housing unit.

This is a considerable attractive option to purchase housing property since the customers save upon the interest payable on housing loans till possession of the house property. However, these housing loan products have additional risks. These include disputes between individual borrowers and developers, default or delayed payment of interest or EMI during the agreed period on behalf of the borrower, non-completion of the project on time, etc. In recent times, the NPAs of banks have seen a rising trend. Coupled with no signs of recovery in the domestic economy, this has panned out a dismal situation.

The RBI issued a notification for the disbursal of housing loans sanctioned to individuals linked to the stages of construction of the housing project or houses instead of upfront disbursal in cases of incomplete or under-construction or green field housing projects. This notification is issued in view of the higher risks associated with such lump-sum disbursal of sanctioned housing loans and customer suitability issues as per RBI notification.

This notification may be a big hurdle for real estate developers in future to sell their housing projects. This may stop their funding, and thus create pressure on their financial statements. However, this may be good news for banks having housing loan exposure.