Few banks have introduced certain innovative housing loan schemes in association with developers / or builders, such as upfront disbursal of sanctioned individual home loans to the builders without linking the disbursals to various stages of construction of housing project, interest / EMI on the housing loan availed by the individual borrower being serviced by the builders during the construction period / or specified period, etc.
According to Reserve Bank of India's (RBI) recent circular, such housing loan products are likely to expose the banks as well as their housing loan borrowers to additional risks, like cases of disputes between individual borrowers & developers, default or / delayed payment of interest / EMI by the developer / or builder during the agreed period on behalf of the borrower & non-completion of the project on time.
Further, any delayed payments by developers / or builders on behalf of individual borrowers to banks may lead to lower credit rating or / scoring of such borrowers by credit information companies (CICs), as information about servicing of loans gets passed on to the CICs on a regular basis.
In cases where bank loans are also disbursed upfront on behalf of their individual borrowers in a lump-sum to builders / or developers without any linkage to stages of construction, banks run dis-proportionately higher exposures with concomitant risks of diversion of funds.
In view of the higher risks associated with such lump-sum disbursal of sanctioned home loans and customer suitability issues, StCBs and CCBs have been advised that disbursal of home loans sanctioned to individuals should be closely linked to the stages of construction of the housing project / or houses and upfront disbursal should not be made in cases of incomplete / or under-construction / or green field housing projects.
It has been emphasised that StCBs / or CCBs while introducing any kind of product should take into account the customer suitability & appropriateness issues and also ensure that the borrowers / or customers are made fully aware of the risks & liabilities under such products.
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