AHMEDABAD: Gujarat RERA has observed serious loopholes in loan practices by builders and non-banking finance companies (NBFCs) for project loans, including mortgaging unsold inventories of other projects and even disbursement without RERA registration.
The authority has decided to raise the issue with the state finance department to take it to the Reserve Bank of India (RBI). GujRERA believes that to protect rights of buyers, there is a need for a standard operating procedure for real estate projects being funded by NBFCs.
Senior GujRERA officials say they have observed that builders in need of funds opt for funding from NBFCs, and many of them avail much higher funds than the collateral. They also go for aggressive loans by mortgaging unsold inventories of other projects and, many times, hide these details from buyers.
“We came to know about cases where developers get loans for a new project by mortgaging unsold inventory of other under-construction or finished projects. This hurts buyers’ interest in case of loan default by the developer. We have received such complaints wherein NBFCs have raised claims for the possession of property due to loan default by the developer, for which the buyer has already paid the developer.”
An official added, “There is also a practice of disbursement of bigger tranches without considering construction milestones. There are many cases of cross-project funding as well. Many NBFCs make loan disbursements without RERA registration of the project, so in such scenarios, buyers’ interests suffer. There is an unstructured format for NOC and allowing execution of agreements of sale without NOC, so there are possibilities of conflict over ownership.”
Officials said that the authority prepared a presentation which will be submitted to the state finance department, and there is a need to bring this to the notice of the RBI. GujRERA will suggest that NBFCs must follow rules laid by the RBI for land funding.
