Mixed views on linking home loans to stage of construction
It will reduce the risk of customers and banks as money won't get diverted to other projects. So, the ongoing project will not be affected," said NAREDCO VP Sunil Mantri
Sep 05, 2013
Source : The Economic Times

 

MUMBAI: The Reserve Bank's decision to link disbursal of home loans with stages of construction has received a mixed reaction from the industry, as some believe the move will streamline the sector while others worry it will impact delivery of projects.

"We welcome this move as it aims at protecting the interest of consumers, banks and developers simultaneously in the long run. It will also reduce the risk of customers and banks as money won't get diverted to other projects. So, the ongoing project will not be affected," National Real Estate Developers' Council Vice-president Sunil Mantri said.

The RBI notification follows the introduction by some banks of "innovative housing loan schemes" like 80:20 and 75:25 in association with developers or builders, where upfront disbursal of housing loans is made to builders without being linked to the various stages of construction.

The central bank yesterday said such home loan products are likely to expose banks and their borrowers to additional risks.

Jones Lang LaSalle Managing Director - Capital Markets-- Shobhit Agarwal said: "This move is aimed at protecting the interest of property buyers who are not aware of the long-term financial implications of such and similar schemes. It is definitely meant to advance the cause of greater transparency in the Indian real estate sector, and also to protect the financial institutions that provide funding in it."

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