TNS

Your bank may be disbursing home loans without due diligence of realty projects. So don’t be lax in checking out the builder’s credentials

If you believe that the project in which you have booked your flat is free from all the issues just because your bank has cleared your loan application and approved the required amount — then it’s time to think again.

While many buyers think that the lending bank usually carries out all the checks before approving loan for a project, the reality is very different. It has been seen that banks are not doing enough to gauge the authenticity of housing projects before disbursing loans.

There have been numerous cases in which loans have been sanctioned for projects for which the builders did not have licenses to develop residential colonies. Banks have even been found to have cleared loans to two or three persons for the same flat in the NCR.

Hair raising accounts

Relating one such incidence Ashish Kaul, Vice-President of the Federation of Apartment Owners’ Association, Greater Faridabad, says that home loans had been sanctioned for about 80 per cent units in a society with 10,000 apartments even though its building plan had not been approved by the district town planner, Faridabad. Kaul got this information from a RTI reply. Shocked over the apathy of the banks, Kaul has not only complained to the Reserve Bank of India against the banks’ lack of due diligence in the Greater Faridabad case, but has also filed a PIL in the Punjab and Haryana High Court against what he calls the massive violation of the Punjab Scheduled Roads and Controlled Areas Restriction of Unregulated Development Act, 1963, which regulates building plans in plotted colonies.

Meanwhile, more than 400 persons have been cheated of amounts ranging from Rs 25 lakh to Rs 35 lakh after they fell prey to the promise of Shiv Kala Charms. They found that “their” apartment had been sold to multiple buyers and banks had granted overlapping mortgages on them. Mahipal Singh, Managing Director of NCR-based MMR group, admits that what has happened with the customers of Shiv Kala Charms has badly shaken the prospective investors in real-estate. “I feel that it is high time real companies either change or perish. Those realty firms who try dupe their customers can not survive in the market.”

Prominent among these lenders are banks such as Axis, Oriental Bank of Commerce, Syndicate Bank and housing finance companies such as HDFC, LIC Housing Finance Limited (LICHFL), Dewan Housing Finance Corporation Limited (DHFL), Punjab National Bank Housing Finance and Indiabulls.

On August 31, 2011, HDFC Bank came out with a list of 78 apartments in Shiv Kala Charms, stating that these had been legally mortgaged to the bank. This opened a can of worms. Buyers who had either taken loans from other banks or organised finances on their own were shocked to find their apartment numbers listed by banks with which they had no dealings.

Among those who took notice of this list was Avneesh Kaushik, who filed a case against the developer in the economic offences wing (EOW) of Delhi Police. Kaushik bought apartment number 2093 on the ninth floor of tower 2 in the project in January 2008 with a home loan from Syndicate Bank. Unknown to him, the developer had sold the apartment to another buyer who was granted finance by LICHFL.

It may be recalled that Shiv Kala Charms is a part of a cooperative society, Golf Course Sahkari Awas Samiti Ltd, which was formed in 2004. The society leased 9731.79 square meters of land from the Greater Noida Development Authority (GNIDA). In latest to this case, the Economic Offences Wing (EOW) of the Delhi Police has arrested a 47-year-old builder for allegedly cheating investors of a housing project in Greater Noida. The accused had allotted over 300 flats in a housing project that proposed availability of only 140 flats.

The arrest came after those who had invested money in the project named ‘Shivkala Groups’ lodged complaints alleging that the company —Golf Course SahakariAwas Samiti — cheated them on the pretext of a pre-launch project.

During investigations, the police found that multiple allotments of flats were made and financial institutions had advanced more than one loan on the same flat, but to different persons. There were also allotments in respect to non-existent flats.

Reasons for lapses

Banks fail to carry out checks due to a number of reasons. According to a banking expert, “One reason is the nexus between a developer and a bank agent. Banks are in a dominant position to bully gullible homebuyers and so overlook safety norms knowing that it is the vulnerable buyers who will bear the brunt in case of a problem at a later stage.”

Sanjay Khanna, Delhi-based director of Kailash Nath Projects says, “A buyer should be extra cautious and check all the necessary approvals that builders require before launching a project. Things are so messy in the realty sector as there is no regulatory authority to look into these issues.”

There is also a feeling that many times banks disburse loans as they depend to a large extent on the legal advice outsourced to legal firms. Banks need to develop domain experts.

The moral of these two stories are that would be buyers of flats need to be very careful in investing in any project.

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