REVISED GUIDANCE VALUE – SOON!


THE GOVERNMENT IS KEEN ON REVISING THE GUIDANCE VALUE OF THE PROPERTIES IN AND AROUND BANGALORE AND MIGHT BRING IT TO THE MARKET VALUE/PRICE SOON.

THE BUYERS WHO HAVE ALREADY BOOKED THE APARTMENTS/VILLAS/SITES IN PRELAUNCH OFFERS AND THOSE WHO MIGHT BE REGISTERING IT BY THE END OF JULY,2013  WILL HAVE TO BEAR  ADDITIONAL BURDEN OF STAMP DUTY AND REGISTRATION FEE BETWEEN  2% 10% DEPENDING UPON THE VALUE OF THE PROPERTIES.

THERE IS A CLEAR CUT INDICATION THAT THE REVISION OF VALUES WILL BE BETWEEN 20% TO 200%. 

REAL ESTATE REGULATION – A REALITY


THE CABINET ON TUESDAY CLEARED THE MOST SOUGHT AFTER REAL ESTATE(REGULATION AND DEVELOPMENT) BILL 2013, SEEK TO SET UP THE REGULATOR IN EVERY STATE TO PROTECT THE INTERESTS OF THE BUYERS AND TO ENSURE FAIR PRACTICES IN THIS SECTOR.

RBI DIRECTION ON CHEQUE RETURN CHARGES – Levy Cheque return charges only if customer is at fault


RBI/2012-13/493
DPSS.CO.CHD.No. 2030/03.06.01/2012-2013

May 7, 2013

The Chairman and Managing Director / Chief Executive Officer
All Scheduled Commercial Banks including RRBs /Local Area Banks
Urban Co-operative Banks / State Co-operative Banks /
District Central Co-operative Banks

Madam / Dear Sir,

Delay in re-presentation of technical return cheques and levy of charges for such returns

As you are aware, banks are expected to indicate the timeline for realisation of local/outstation cheques in their Cheque Collection policy(CCP) and charges for cheque returns to be levied in an upfront manner with due prior notice to the customers as enumerated in RBI circulars no. DPSS.CO. (CHD) No. 873 / 03.09.01 / 2008-09 dated November 24, 2008 and DBOD.No.Dir.BC. 56 /13.03.00/2006-2007 dated February 2, 2007 respectively.

2. However,recently, instances have been brought to our notice where banks are (i) levying cheque return charges even in cases where customers have not been at fault in the return and (ii) delaying the re-presentation of the cheques which had been returned by the paying banksunder technical reasons. Both of these issues result in unsatisfactory customer service.

3. It is, therefore, considered necessary to streamline the procedure followed by all banks in this regard. Accordingly, banks are advised to adhere to the following instructions with immediate effect:

1.    Cheque return charges shall be levied only in cases where the customer is at fault and is responsible for such returns. The illustrative,but not exhaustive, list of returns, where the customers are not at fault are indicated in the annex.

2.    Cheques that need to be re-presented without any recourse to the payee, shall be made in the immediate next presentation clearing not later than 24 hours(excluding holidays) with due notification to the customers of such re-presentation through SMS alert, email etc.

4. Banks are accordingly advised to reframe their CCPs to include the procedures indicated in paragraph 3(i) and 3(ii) above, and may note to give publicity to their revised CCPs for better customer service and dissemination of information.

5. The above instructions are issued under Section 18 of the Payment and Settlement Systems Act, 2007 (Act 51 of 2007).

6. Please acknowledge receipt and confirm compliance.

Yours faithfully,

(Vijay Chugh)
Chief General Manager


TECH PARK NEAR HEBBAL


A SMALL TIME SILK CLOTH MERCHANT ON CHOWDESHWARI TEMPLE STREET, NEAR AVENUE ROAD, FROM AN UNKNOWN DESTINATION IN RAJASTHAN, CAME WITH 0000000000,CLAIMS TO BE AN EXPORTER,  BUILT A REAL ESTATE EMPIRE WITHOUT ANY EDUCATIONAL NOR TECHNICAL BACKGROUND, WORTH OVER RS1000 CRORES IN A VERY SHORT SPAN WITH THE HELP OF POLITICIAN AND BUREAUCRATS, ALLEGED TO HAVE LARGE SCALE IRREGULARITIES IN LAND ACQUISITION.

A LARGE CHUNK OF RACHENAHALLY VILLAGE, WHICH WAS ACQUIRED FOR THE RESIDENTIAL DEVELOPMENT BY THE BDA WAS TRANSFERRED FOR INDUSTRIAL DEVELOPMENT AND THE DEVELOPER. THE PRICES OF RESIDENTIAL SITES IN THAT AREA IS SOLD BETWEEN RS5,000/- TO RS7,000 A SQUARE FEET.  THE ORIGINAL OWNERS OF THE LAND HAVE BEEN PAID A PITTANCE OF RS 20,00,000/- AN ACRES, WHILE THE REAL ESTATE COMPANY MADE BILLIONS.

 

 

UNTOLD HORRORS OF XXX & XXXXXXXX (XXXXXX CONSTRUCTIONS) -THE BOMBER COMMAND !!!


THE GREATEST DEVELOPERS AND BUILDERS WILL NOT PROVIDE THE DOCUMENTS FOR BUYERS AS THEY CONTAIN ATOM BOMBS !!!!!!!!!!!!!!

YES.

IT IS TRUE.

THEY HAVE BOMBED THE HOPES OF MANY DECENT AND HONEST BUYERS!!!!!!!!!

THEY HIDE, CONCEAL AND IN A BID TO DECEIVE, DOCUMENTS ARE NOT SUBMITTED FOR LEGAL EXAMINATION AND VERIFICATION AND THE BUYERS MUST BUY IT BY INSPECTING THE XEROX COPIES. THEY DO NOT HAVE THE ORIGINALS.

THE MARKETING `L` BOARD GUYS ARE NOT AWARE OF ANY OF THE REPORTED DISCREPANCIES AND CRIMINAL CASES ON THE PROPERTIES WHICH THEY MARKET WITH GREAT FUN AND FARE. IT IS FUN FOR THEM AND FARE FOR THE BUYERS. BUYERS ARE SCARED ABOUT THESE DEVELOPERS CONTACT WITH XXXXXXXXXXXX.

HOW DID THE BANKS APPROVE THESE PROJECTS?

DID THE BUYERS QUESTION THESE BANKS?  NO

SANCTION OR APPROVAL OF BANK LOAN DOES NOT CONFER ANY RIGHT, TITLE AND INTEREST. 

IN CASE OF LITIGATION, THE BANK WILL NOT WAIVE THE LOAN. IF THE BORROWER DISPOSSESS THE PROPERTY OR IF THERE IS A LONG DRAWN LEGAL BATTLE ON THE TITLES, THE BANK WILL STILL RECOVER THE LOAN FROM THE BORROWER WITHOUT ANY MERCY, UNLESS THE BORROWER DECLARES INSOLVENCY

 

 

WATER SCARCITY WILL BE TOO ACUTE THIS SUMMER


DUE TO A FAILED MONSOON, DEPLETION OF UNDERGROUND WATER TABLE AND POOR WATER STORAGE POSITION IN THE RESERVOIRS FEEDING BANGALORE; MARCH, APRIL AND MAY 2013 WILL BE A NIGHTMARE !!!!

TG HALLI RESERVOIR STORAGE POSITION HAS ALREADY REACHED ITS LOWEST EBB IN YEARS  !!!!

KRS WATER LEVEL MAY TOUCH THE DEAD STORAGE BY FEB, 2013, FIRST WEEK ITSELF!!!

THE RESULTS OF FASTER UNPLANNED DEVELOPMENT AND POPULATION EXPLOSION !!!!!!!!!!!!

 

REGISTRATION OF PROPERTY DOCUMENTS IN KARNATAKA IS PARALYSED


DUE TO THE STRIKE BY THE OUTSOURCED DATA ENTRY OPERATORS, THE REGISTRATION OF PROPERTIES HAVE BEEN TOTALLY PARALYZED IN THE STATE AND EXECUTION OF PROPERTY DOCUMENTS CONTINUED IN SNAIL PACE IN SOME OF THE SUB-REGISTRAR OFFICES.  SOME SUB-REGISTRAR OFFICES FUNCTIONED WITH VERY FEW STAFF AND THE DATA ENTRY OPERATORS WHO ARE THE MAIN OPERATORS WERE ON STRIKE.  THE DATA ENTRY OPERATORS DECLARED THAT THE STRIKE IS INDEFINITE.

IT IS RELIABLY LEARNT THAT THERE IS SOME POLITICAL OVERTONE RELATED WITH THIS ISSUE.IT IS SEEN THAT SOME OF THE SENIOR OFFICERS WERE UNAVAILABLE AND HAD EVEN SWITCHED OFF THEIR MOBILE IN ORDER TO AVOID THE PUBLIC IRE.

Fake BBMP NOC for power connection- under investigation – A news report- BUYERS OF APARTMNET-BEWARE !!!! NO POWER CONNECTION


The BESCOM`s vigilance wing noticed a blatant contradiction in a BBMP ‘NOC’ and sought a clarification. The BBMP’s technical vigilance cell immediately spotted the forgery – the letterhead was fake and the signature did not tally with that of the engineer concerned

 The Bescom`s vigilance wing which alerted the BBMP commissioner to the fraud and asked for a verification of the letter and the signature, and the civic authorities realised that the BBMP letterhead had been fabricated, the work order was fake and the signature of the engineer concerned was forged.

 The issue pertains to a power connection to an apartment on Benson Cross Road in Jayamahal ward. While looking into the approvals, the vigilance wing found something amiss about the BBMP letter dated January 10, 2012. The letter, purportedly issued by the superintending engineer of TVCC (technical vigilance cell under the commissioner), S Prabhakar, said: “The building plan pertaining to number XXXX, Benson Town has been approved by the BBMP. This plan is okay, it has violated the byelaws, and we have no objections if power connection is given to the building.’’ The obvious contradiction in the letter did not go unnoticed by the Bescom vigilance wing.

 Enclosing a copy of the letter, the vigilance wing wrote to the BBMP commissioner on November 24 asking about its veracity. “The issue pertains to the NoC issued to the apartment XXX, Benson Cross Road by the BBMP. While inquiring into the power connection issue, we found this letter. We want to verify its credibility. Please look into it, verify if it is issued by the said office, the signature of the official and furnish us the details,’’ the vigilance wing’s communication said.

 According to a senior official of TVCC, a couple of times in the past, Bescom officials had come to them to cross-check similar letters but nothing had been sought in writing till now. “There has always been a turf war between BBMP and Bescom engineers over road-cutting approvals. Bescom engineers have started this unhealthy trend of fabricating the letters and forging the signatures of BBMP engineers for power connections and road-cutting sanctions. One look at the NoC letter, and we could make out that it was not issued by TVCC,’’ the official said.

 The commissioner forwarded the letter to TVCC for verification. And the truth was out in a jiffy — first of all, BBMP does not have a letterhead to the effect: “BBMP, Office of the Superintending Engineer (TVCC), NR Square, Bangalore”. Secondly, the letter number is fake and TVCC doesn’t write official letters in such a format. Lastly, the contents are contradictory and the signature is not that of the engineer concerned. 

 TVCC superintending engineer S Prabhakar, under whose signature and seal the NoC was fabricated, has written to his higher-ups about the forgery.

 

DECLARATION CUM INDEMNITY BOND SIGNED BY THE HOME LOAN BORROWERS


HOME LOAN BORROWERS ARE UNAWARE OF THE FACTS THAT AT THE TIME OF AVAILING THE HOME LOAN EITHER FOR THE PURCHASE AND CONSTRUCTION OF THE HOUSE(COMPOSITE LOAN) OR FOR THE PURCHASE OF THE HOUSE OR APARTMENT, A DECLARATION CUM INDEMNITY BOND WILL BE SIGNED AS PER THE DIRECTIVES OF THE RESERVE BANK OF INDIA, WHICH GENERALLY CONTAINS THE FOLLOWING CLAUSE:

DECLARATION CUM INDEMNITY BOND EXECUTED BY THE BORROWER IN FAVOUR OF THE BANK

 Further I indemnify XXXHFL(BANK) from any losses, interests, claims or rights, financial or otherwise if any, arising out of non availability of documents, minor’s interest, litigation, non regularization of deviations in constructions etc and other acts of omission/commission in connection with the said    schedule property and construction /development as mentioned above and declare and assure that the Schedule property has been constructed as per sanctioned plan from XXXXX and if at any point of time, ever proved otherwise, the XXXHFL(BANK) may initiate action for the recovery of the loan.

 

BUILDER`S ANTICS & TACTICS AT BANGALORE


AS IT IS SAID, THE VIOLATIONS AND IRREGULARITIES ARE A WAY OF LIFE FOR CHEATS AND FRAUDS, EVEN THE GENTLEMEN `BUILDERS AND DEVELOPERS` ARE TAKING SHELTER UNDER THIS UMBRELLA. 

WHEN ILLEGALITIES/VIOLATIONS AND NON COMPLIANCE TO THE PREVAILING LAWS ARE BROUGHT TO NOTICE OR INTIMATED WITH SUPPORTING DOCUMENTARY EVIDENCE, THE OWNERS/SELLERS/DEVELOPERS, CORNERED WITH THE TRUTH AND FACTS, THEY RESORT TO LOTS OF ANTICS AND GIMMICKS: READ FEW SUCH STATEMENTS:

A)WE ARE LEADING BUILDERS AND DO NOT HAVE THE INTENTION TO CHEAT!!!(FALSE)

THE TRUTH IS:

THEY SUBMIT DOCUMENTS EITHER FAKE/TAMPERED/IRRELEVANT/MISREPRESENTED TO OBTAIN THE CLEARANCES FROM THE STATUTORY GOVERNMENT AUTHORITIES WITH A CLEAR INTENTION TO DECEIVE OR COMMIT FRAUD FOR BONAFIDE BENEFIT OR FINANCIAL GAIN.

B)WHEN PROVED, THAT THEIR DOCUMENTS OR LICENSES ARE NOT LEGAL OR REGULAR OR NOT AS PER LAW:

THEY TRY TO PROVIDE IRRELEVANT DETAILS AND CONTEND THAT IT IS THE LAW.

C). THE BANKS HAVE CLEARED OR APPROVED THE PROJECT, HENCE, THERE IS NO NEED FOR ANY LEGAL INVESTIGATION OR THE TITLES ARE ABSOLUTELY CLEAR.

NO.  IT IS NOT TRUE. BANK LOAN SANCTION WILL NOT CLEAR THE IRREGULARITIES/VIOLATIONS AND CONFER GOOD MARKETABLE TITLES. (AS PER THE DIRECTIVES OF THE RBI, THE BANKS CANNOT AND MUST NOT FINANCE OR LEND OR SANCTION HOME LOANS TO PROPERTIES WHICH ARE NOT CONSTRUCTED AS PER THE BYE LAW OR THE SANCTIONED PLAN AND HAVE IRREGULARITIES)

D). FINALLY, WHEN THEY ARE CORNERED AND DO NOT HAVE ANY ALTERNATIVES (LIES) TO SAY.

THEY SAY, THIS IS WHAT WE HAVE!!!!!!!!!!!!!!!!!!!

IF YOU WANT, YOU BUY!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

IRREGULARITIES, VIOLATIONS, MISREPRESENTATON OF FACTS & CONCEALMENT OF FACTS BY TOP BUILDERS AT BANGALORE


IT IS NOTICED THAT IRREGULARITIES, VIOLATIONS, DEVIATIONS, MISREPRESENTATION OF FACTS, CONCEALMENT OF MATERIAL FACTS AND IRRELEVANT DOCUMENTS ARE SUBMITTED TO THE GOVERNMENT AUTHORITIES AND ALL THE BOARDS ETC TO OBTAIN THE LICENSES, APPROVALS, NOC AND CLEARANCES HAVE BECOME A PART AND PARCEL OF THE REAL ESTATE AND CONSTRUCTION BUSINESS.  OF LATE, EVEN, THE SO CALLED, TOP  BUILDERS ARE ALSO INTO  THIS KIND OF ILLEGITIMATE PRACTICE.

UNSUSPECTING HOME BUYERS, UNAWARE OF THESE INTRINSIC DETAILS, HAVE NEVER GO FOR INVESTIGATIONS IN TO THESE APPROVALS, NOC, CONSENT AND LICENSES. THE BUYERS ARE HAPPY, IF THEY GET THE HOME LOAN SANCTIONED AND ARE NOT WORRIED ABOUT THIS IMPORTANT ASPECT OF THE PROJECT OR THE CONSTRUCTION.

IT IS ALSO FURTHER NOTICED THAT IT IS WITH CLEAR INTENTION TO DECEIVE OR TO COMMIT FRAUD, DETAILS ARE CONCEALED OR HIDDEN OR MISREPRESENTED TO OBTAIN THESE CLEARANCES.  IF THESE IRREGULARITIES/VIOLATIONS/FALSE REPRESENTATIONS ARE BROUGHT TO THE NOTICE OF THE AUTHORITIES, THE LICENSES/APPROVALS/CONSENTS/NOC FROM THE GOVERNMENT DEPARTMENTS STANDS AUTOMATICALLY CANCELLED OR STANDS WITHDRAWN.

THE PROPERTY BUYER, WHO LAYS THE EMPHASIS ON THE GOODWILL OF THE BUILDER, REALISES HIS FOLLY, WHEN SUCH IRREGULARITIES ARE BROUGHT TO THE NOTICE AND ACTION TAKEN.  BUT IT IS TOO LATE FOR THE BUYER TO GET OUT OF IT.

IMMEDIATELY UPON SUCH DISCOVERY, A GROUP OF THE AFFECTED BUYERS WILL FORM A GROUP TO FIGHT/CONTEST THE PROCEEDINGS INITIATED BY THE AUTHORITIES,  WITHOUT THE SIMPLE KNOWLEDGE ABOUT THE ILLEGALITIES/VIOLATIONS/BLUNDER COMMITTED BY THE SELLER/BUILDER/DEVELOPER , UNDER THE DISGUISED LEADERSHIP OF THE BUILDER`S/SELLER`S/OWNER/`S AGENT TO RESOLVE THE ISSUE.

FORFIETURE OF EARNEST MONEY DEPOSIT/SECURITY DEPOSIT/ADVANCE PAID FOR THE PURCHASE OF PROPERTY


Advance/ Security Deposit/Earnest money is paid or given at the time when the contract is entered into and, as a pledge for its due performance by the depositor to be forfeited in case of non-performance, by the depositor.

It (Advance/earnest money deposit/security deposit)represents the guarantee that the contract (clauses in the sale agreement) would be fulfilled by both the parties.  In other words, ‘earnest’ is given to bind the contract, which is a part of the purchase price when the transaction is carried out and it will be forfeited when the transaction falls through by reason of the default or failure of the purchase.

To justify the forfeiture of advance money being part of ‘earnest money’/ `security deposit` the terms of the contract must be clear and explicit.

If the seller fails to perform the contract the purchaser can also get the double the amount/whatever the amount stated in the agreement, if it is so stipulated.

In case if the payment made is that of part payment of purchase price/consideration, then, it cannot be forfeited unless it is a guarantee for the due performance of the contract.

If the payment is made only towards part payment of consideration and not intended as earnest money then the forfeiture clause will not apply. 

 

ENCUMBRANCE CERTIFICATE ?


 

WHAT IS ENCUMBRANCE CERTIFICATE?

IT IS A SEARCH DOCUMENT.

WHY  IS IT NEEDED?

IT DISPLAYS THE CHARGES ON THE PROPERTY.  IT IS TO KNOW THE CREATION OF MORTGAGE OR A CHARGE OR AN AGREEMENT OF SALE ON THE SCHEDULE PROPERTY.

WHICH GOVERNMENT OFFICE ISSUES THE ENCUMBRANCE CERTIFICATE?

JURISDICTIONAL SUB-REGISTRAR OFFICES.

HOW TO GET IT?

SUBMIT AN APPLICATION.

HOW TO APPLY?

PREPARE AN APPLICATION AND SUBMIT IT IN THE JURISDICTIONAL SUB-REGISTRAR OFFICE WITH ALL THE RELEVANT DETAILS OF THE PROPERTY.

WHERE TO APPLY? WHERE TO SUBMIT THE APPLICATION FORM?

SUB-REGISTRAR OFFICE.

WHAT IS THE NUMBER OF APPLICATION?

FORM NO.22.

WHAT IS THE FEES?

IT IS RS15/- FOR THE SEARCH AND RS10/- FOR EVERY YEAR THEREAFTER PER DOCUMENT.

WHERE TO PAY THE FEES?

SUB-REGISTRAR OFFICE.

HOW TO PAY THE FEES?

CASH.  THE RECEIPT WILL BE ISSUED.

WHAT IS THE FORM TO BE FILLED UP?

FORM NO.22.

WHAT ARE THE DETAILS TO BE FILLED UP IN THE APPLICATION FORM?

ALL THE RELEVANT DETAILS OF THE PROPERTY ALONG WITH THE BOUNDARIES AND EXTENT.

WHO CAN SUBMIT THE APPLICATION FORM?

ANYBODY.

WHERE IS THE FORM AVAILABLE?

SUB-REGISTRAR OFFICE.

WHERE TO RECEIVE OR COLLECT THE ENCUMBRANCE CERTIFICATE?

SUB-REGISTRAR OFFICE.

WHAT IS IN FORM NO.15?

THIS FORM WILL BE ISSUED WHERE THERE ARE TRANSACTION/S ON THE PROPERTY OR CHARGES REGISTERED ON THE PROPERTY.

WHAT IS IN FORM NO.16?

THIS FORM IS ISSUED WHERE THERE ARE NO TRANSACTIONS OR CHARGES ON THE PROPERTY.

WHY ENCUMBRANCE CERTIFICATE IS NEEDED FOR PROPERTY TRANSACTIONS?

TO KNOW THE LOANS AVAILED ON THE PROPERTY OR CHARGES ON THE PROPERTY OR TO KNOW, IF THERE IS ANY OTHER TYPE OF TRANSACTIONS EFFECTED ON THE PROPERTY LIKE SALE AGREEMENT OR GIFT ETC.

WHAT ARE THE CONTENTS OF THE ENCUMBRANCE CERTIFICATE?

SURVEY NO OR PROPERTY NO OR APARTMENT NO OR PROPERTY DETAILS WITH SCHEDULES.

WHO WILL AFFIX THE SIGNATURE IN THE ENCUMBRANCE CERTIFICATE?

SUB- REGISTRAR.

WHAT IS THE PERIOD/DURATION FOR WHICH THE ENCUMBRANCE CERTIFICATE APPLIED/SUBMITTED?

ANY PERIOD FOR WHICH THE DOCUMENTS ARE AVAILABLE AT THE CONCERNED JURISDICTIONAL SUB-REGISTRAR OFFICE.

 

HOUSING LOAN – MASTER CIRCULAR – RBI – 02-07-2012


Date: Jul 02, 2012 Master Circular – Housing Finance

RBI/ 2012-13/73
DBOD. No.DIR.BC.07/08.12.001/2012-13

July 2, 2012
Ashadha 11, 1934, (Saka)

All Scheduled Commercial Banks
(excluding RRBs)

Dear Sir/Madam,

Master Circular – Housing Finance

Please refer to the Master Circular DBOD No. Dir. BC. 03 /08.12.001/2011-12 dated July 1, 2011 consolidating the instructions / guidelines issued to banks till that date relating to Housing Finance. The Master Circular has been suitably updated by incorporating the instructions issued up to June 30, 2012 and has also been placed on the RBI website (http://www.rbi.org.in). A copy of the Master Circular is enclosed.

Yours faithfully

(Sudha Damodar)
Chief General Manager

Encl: as above


CONTENTS

Sr.No.

Particulars

A

Purpose

B

Classification

C

Previous instructions consolidated

D

Scope of Application
Structure

1

Introduction

2

Direct Housing Finance

3

Indirect Housing Finance

4

Housing Loans under Priority Sector

5

RBI Refinance

6

Construction Activities eligible for Bank Credit

7

Construction Activities not eligible for Bank Credit

8

Reporting

9

Home Loan Account Scheme (HLAS) for NHB

10

Bank’s Exposure to Real Estate Sector

11

Risk Weight on Housing Finance

12

Loan to Value (LTV) Ratio

13

Delhi High Court Order on Unauthorized Construction

14

Terms and Conditions for Banks Investments in Mortgage Backed Securities (MBS)

15

Annex : Financial assistance granted by scheduled commercial banks under the category ‘Housing Finance’ as on September 30/March 31

16

Appendix : Housing Finance circulars

Master Circular – Housing Finance

A. Purpose

To consolidate framework of rules/regulations and clarification on Housing Finance issued by Reserve Bank of India from time to time.

B. Classification

A statutory directive issued by the Reserve Bank in exercise of the powers conferred by Sections 21 and 35 A of the Banking Regulation Act, 1949.

C. Previous instructions consolidated

This Master Circular consolidates and updates all the instructions contained in Circulars listed in the appendix and clarifications issued during the year.

D. Scope of Application

Applicable to all Scheduled Commercial Banks, excluding Regional Rural Banks.

Structure

  1. 1.    Introduction
  2. 2.    Direct Housing Finance
  3. 3.    Indirect Housing Finance
  4. 4.    Housing Loans Under Priority Sector
  5. 5.    RBI Refinance
  6. 6.    Construction Activities Eligible For Bank Credit
  7. 7.    Construction Activities Not Eligible For Bank Credit
  8. 8.    Reporting
  9. 9.    Home Loan Account Scheme (HLAS) for NHB
  10. 10.                       Banks’ Exposure to Real Estate Sector
  11. 11.                       Risk Weight on Housing Finance
  12. 12.                       Loan to Value (LTV) Ratio
  13. 13.                       Delhi High Court Order on Unauthorized Construction
  14. 14.                       Terms and conditions for Banks Investments in Mortgage Backed Securities (MBS)
  15. 15.                       Annex : Financial assistance granted by scheduled commercial banks
    under the category ‘Housing Finance’ as on September 30 /March 31
  16. 16.                       Appendix: Housing Finance circulars

1. INTRODUCTION

In pursuance of National Housing Policy of Central Government, Reserve Bank of India has been facilitating the flow of credit to housing sector. Since housing has emerged as one of the sectors attracting a large quantum of bank finance, the current focus of RBI’s regulation is to ensure orderly growth of housing loan portfolios of banks.

1.1.1 National Housing Policy

As a part of the strategy to overcome the colossal housing shortage, the Central Government adopted a comprehensive National Housing Policy which, among other things, envisaged:

  1.        i.            development of a viable and accessible institutional system for the provision of housing finance;
  2.      ii.            establishing a system where housing boards and development authorities would concentrate on acquisition and development of land and infrastructure; and
  3.   iii.            creation of conditions in which access to institutional finance is made easier and affordable for individuals for construction/buying of houses/flats. This may include outright purchase of houses/flats constructed by or under the aegis of public agencies.

Banks with their vast branch network throughout the length and breadth of the country occupy a very strategic position in the financial system and were required to play an important role in providing credit to the housing sector in consonance with the National Housing Policy.

1.1.2 Housing Finance Allocation

Keeping in view the objectives of National Housing Finance Policy, RBI was announcing minimum housing finance allocation annually on the basis of the growth of deposits recorded during the previous year till the year 2002-03. Banks could deploy their funds under the housing finance allocation in any of the three categories, i.e.

  1.        i.            direct finance,
  2.      ii.            indirect finance,
  3.   iii.            investment in bonds of NHB/HUDCO, or combination thereof.

2. DIRECT HOUSING FINANCE

2.1 Direct Housing Finance refers to the finance provided to individuals or groups of individuals including co-operative societies.

2.2 Banks are free to evolve their own guidelines with the approval of their Boards on aspects such as security, margin, age of dwelling units, repayment schedule, etc.

2.3 Other Guidelines

The following types of bank finance may be included under Direct Housing Finance:

  1.        i.            Bank finance extended to a person who already owns a house in town/village where he resides, for buying/ constructing a second house in the same or other town/ village for the purpose of self occupation.
  2.      ii.            Bank finance extended for purchase of a house by a borrower who proposes to let it out on rental basis on account of his posting outside the headquarters or because he has been provided accommodation by his employer.
  3.   iii.            Bank finance extended to a person who proposes to buy an old house where he is presently residing as a tenant.
  4.   iv.            Bank finance granted only for purchase of a plot, provided a declaration is obtained from the borrower that he intends to construct a house on the said plot, with the help of bank finance or otherwise, within such period as may be laid down by the banks themselves.
  5.     v.            Supplementary finance

(a) Banks may consider requests for additional finance within the overall ceiling for carrying out alterations/ additions/repairs to the house/flat already financed by them.

(b) In the case of individuals who might have raised funds for construction/ acquisition of accommodation from other sources and need supplementary finance, banks may extend such finance after obtaining paripassu or second mortgage charge over the property mortgaged in favour of other lenders and/or against such other security, as they may deem appropriate.

3. INDIRECT HOUSINGFINANCE

3.1 General

Banks should ensure that their indirect housing finance is channeled by way of term loans to housing finance institutions, housing boards, other public housing agencies, etc., primarily for augmenting the supply of serviced land and constructed units. It should also be ensured that the supply of plots/houses is time bound and public agencies do not utilise the bank loans merely for acquisition of land. Similarly, serviced plots should be sold by these agencies to co-operative societies, professional developers and individuals with a stipulation that the houses should be constructed thereon within a reasonable time, not exceeding three years. For this purpose, the banks may take advantage of various guidelines issued by NHB for augmenting the supply of serviced land and constructed units.

3.2 Lending to Housing Intermediary Agencies

3.2.1 Lending to Housing Finance Institutions

(i) Banks may grant term loans to housing finance institutions taking into account (long-term) debt-equity ratio, track record, recovery performance and other relevant factors.

(ii) In terms of NHB guidelines, housing finance companies’ total borrowings, whether by way of deposits, issue of debentures/ bonds, loans and advances from banks or from financial institutions including any loans obtained from NHB, should not exceed 16 times of their net owned funds (i.e. paid-up capital and free reserves less accumulated balance of loss, deferred revenue expenditure and intangible assets).

(iii) All housing finance companies registered with NHB are eligible to apply for refinance from NHB and will be eligible subject to the refinance policy. The quantum of term loan to be sanctioned to them will not be linked to net owned fund as NHB has already prescribed the above referred ceiling on total borrowing of housing finance companies. A list of housing finance companies registered with NHB may be obtained by the banks directly from NHB or downloaded from http://www.nhb.org.in.

3.2.2 Lending to Housing Boards and Other Agencies

Banks may extend term loans to state level housing boards and other public agencies. However, in order to develop a healthy housing finance system, while doing so, the banks must not only keep in view the past performance of these agencies in the matter of recovery from the beneficiaries but they should also stipulate that the Boards will ensure prompt and regular recovery of loan installments from the beneficiaries.

3.2.3 Financing of Land Acquisition

In view of the need to increase the availability of land and house sites for increasing the housing stock in the country, banks may extend finance to public agencies and not private builders for acquisition and development of land, provided it is a part of the complete project, including development of infrastructure such as water systems, drainage, roads, provision of electricity, etc. Such credit may be extended by way of term loans. The project should be completed as early as possible and, in any case, within three years, so as to ensure quick re-cycling of bank funds for optimum results. If the project covers construction of houses, credit extended therefore in respect of individual beneficiaries should be on the same terms and conditions as stipulated for direct finance.

It has been observed that while financing real estate developers, certain banks were found to be valuing the land for the purpose of security, on the basis of the discounted value of the property after it is developed, less the cost of development. This is not in conformity with established norms. In this connection, it is advised that banks should have a Board approved policy in place for valuation of properties including collaterals accepted for their exposures and that valuation should be done by professionally qualified independent valuers. As regards the valuation of land for the purpose of financing of land acquisition as also land secured as collateral, banks may be guided as under:

  1. a.    Banks may extend finance to public agencies and not to private builders for acquisition and development of land, provided it is a part of the complete project, including development of infrastructure such as water systems, drainage, roads, provision of electricity, etc. In such limited cases where land acquisition can be financed, the finance is to be limited to the acquisition price (current price) plus development cost. The valuation of such land as prime security should be limited to the current market price.
  2. b.    Wherever land is accepted as collateral, valuation of such land should be at the current market price only.

3.2.4 Terms and Conditions for Lending to Housing Intermediary Agencies

(i) In order to enhance the flow of resources to housing sector, term loans may be granted by banks to housing intermediary agencies against the direct loans sanctioned/ proposed to be sanctioned by the latter, irrespective of the per borrower size of the loan extended by these agencies.

(ii) Banks can grant term loans to housing intermediary agencies against the direct loans sanctioned/proposed to be sanctioned by them to Non-Resident Indians also. However, banks should ensure that housing finance intermediary agencies being financed by them, are authorised by RBI to grant housing loans to NRIs as all housing finance intermediaries are not authorised by RBI to provide housing finance to NRIs.

(iii) Banks have freedom to charge interest rates to housing intermediary agencies without reference to Benchmark Prime Lending Rates (BPLR)upto June 30, 2010. Under the Base Rate System effective from July 1, 2010, all categories of loans will be priced with reference to Base Rate which is the minimum interest rate for all loans.

3.3 Term Loans to Private Builders

3.3.1 In view of the important role played by professional builders as providers of construction services in the housing field, especially where land is acquired and developed by State Housing Boards and other public agencies, commercial banks may extend credit to private builders on commercial terms by way of loans linked to each specific project. However, the banks are not permitted to extend fund based or non-fund based facilities to private builders for acquisition of land even as part of a housing project. The period of credit for loans extended by banks to private builders may be decided by banks themselves based on their commercial judgement subject to usual safeguards and after obtaining such security, as banks may deem appropriate. Such credit may be extended to builders of repute, employing professionally qualified personnel. It should be ensured, through close monitoring, that no part of such funds is used for any speculation in land.

Care should also be taken to see that prices charged from the ultimate beneficiaries do not include any speculative element, that is, prices should be based only on the documented price of land, the actual cost of construction and a reasonable profit margin.

3.3.2 It is advised that banks should adhere to the National Building Code (NBC) formulated by the Bureau of Indian Standards (BIS) in view of the importance of safety of buildings especially against natural disasters. Banks may consider this aspect for incorporation in their loan policies.Banks should also adopt the National Disaster Management Authority (NDMA) guidelines and suitably incorporate them as part of their loan policies, procedures and documentation.

3.3.3 ncorporating clause in the terms and conditions to disclose in Pamphlets / Brochures / advertisements information regarding mortgage of property to the bank

In a case which came up before the Hon’ble High Court of Judicature at Bombay, the Hon’ble Court observed that the bank granting finance to housing / development projects should insist on disclosure of the charge / or any other liability on the plot, in the brochure, pamphlets etc., which may be published by developer / owner inviting public at large to purchase flats and properties. The Court also added that this obviously would be part of the terms and conditions on which the loan may be sanctioned by the bank. Keeping in view the above, while granting finance to specific housing / development projects, banks are advised to stipulate as a part of the terms and conditions that:

(i) the builder / developer / company would disclose in the Pamphlets / Brochures etc., the name(s) of the bank(s) to which the property is mortgaged.

(ii) the builder / developer / company would append the information relating to mortgage while publishing advertisement of a particular scheme in newspapers / magazines etc.

(iii) the builder / developer / company would indicate in their pamphlets / brochures, that they would provide No Objection Certificate (NOC) / permission of the mortgagee bank for sale of flats / property, if required.

Banks are also advised to ensure compliance of the above terms and conditions and funds should not be released unless the builder/developer/company fulfils the above requirements.

On a review, it has been decided that the above mentioned provisions will be mutatis-mutandis, applicable to Commercial Real Estate also.

4. HOUSING LOANS UNDER PRIORITY SECTOR

Banks may refer to the Master Circular on Lending to Priority Sector issued by Rural Planning and Credit Department.

5. RBI REFINANCE

Finance provided by the banks would not be eligible for refinance from Reserve Bank.

6. CONSTRUCTION ACTIVITIES ELIGIBLE FOR BANK CREDIT AS HOUSING FINANCE

The following types of bank credit will be eligible for being treated as housing finance:

  1.        i.            Loans to individuals for purchase/construction of dwelling unit per family and loans given for repairs to the damaged dwelling units of families;
  2.      ii.            Finance provided for construction of residential houses to be constructed by public housing agencies like HUDCO, Housing Boards, local bodies, individuals, co-operative societies, employers, priority being accorded for financing construction of houses meant for economically weaker sections, low income group and middle income group;
  3.   iii.            Finance for construction of educational, health, social, cultural or other institutions/centers, which are part of a housing project and which are necessary for the development of settlements or townships;
  4.   iv.            Finance for shopping complexes, markets and such other centers catering to the day to day needs of the residents of the housing colonies and forming part of a housing project;
  5.     v.            Finance for construction meant for improving the conditions in slum areas for which credit may be extended directly to the slum-dwellers on the guarantee of the Government, or indirectly to them through the State Governments;
  6.   vi.            Bank credit given for slum improvement schemes to be implemented by Slum Clearance Boards and other public agencies;
  7. vii.            Finance provided to –

    (a) the bodies constituted for undertaking repairs to houses, and

    (b) the owners of building/house/flat, whether occupied by themselves or by tenants, to meet the need-based requirements for their repairs/additions, after satisfying themselves regarding the estimated cost (for which requisite certificate should be obtained from an Engineer/Architect, wherever necessary) and obtaining such security as deemed appropriate;

  8. viii.            Housing finance provided by banks for which refinance is availed of from National Housing Bank (NHB);
  9.   ix.            Investment in the guarantee/non-guaranteed bonds and debentures of NHB/HUDCO in the primary market, provided investment in non-guaranteed bonds is made only if guaranteed bonds are not available.

7. CONSTRUCTION ACTIVITIES NOT ELIGIBLE FOR BANK CREDIT

7.1 Banks should not grant finance for construction of buildings meant purely for Government/Semi-Government offices, including Municipal and Panchayat offices. However, banks may grant loans for activities, which will be refinanced by institutions like NABARD.

7.2 Projects undertaken by public sector entities which are not corporate bodies (i.e. public sector undertakings which are not registered under Companies Act or which are not Corporations established under the relevant statute) may not be financed by banks. Even in respect of projects undertaken by corporate bodies, as defined above, banks should satisfy themselves that the project is run on commercial lines and that bank finance is not in lieu of or to substitute budgetary resources envisaged for the project. The loan could, however, supplement budgetary resources if such supplementing was contemplated in the project design. Thus, in the case of a housing project, where the project is run on commercial lines, and the Government is interested in promoting the project either for the benefit of the weaker sections of the society or otherwise, and a part of the project cost is met by the Government through subsidies made available and/or contributions to the capital of the institutions taking up the project, the bank finance should be restricted to an amount arrived at after reducing from the total project cost the amount of subsidy/capital contribution receivable from the Government and any other resources proposed to be made available by the Government.

7.3 Banks had, in the past, sanctioned term loans to Corporations set up by Government like State Police Housing Corporation, for construction of residential quarters for allotment to employees where the loans were envisaged to be repaid out of budgetary allocations. As these projects cannot be considered to be run on commercial lines, it would not be in order for banks to grant loans to such projects.

8. REPORTING

Banks should compile the data relating to Housing Finance at half-yearly intervals on the lines of format given in Annex and keep it ready for being made available to the bank’s internal inspectors/RBI’s inspectors.

9. HOME LOAN ACCOUNT SCHEME (HLAS) OF NHB

9.1 Foreclosure of Loans Obtained from Other Sources

9.1.1 Under the HLAS, a member of HLAS is eligible for a loan after subscription to the scheme for a minimum period of 5 years. The member has to declare while joining the scheme/availing loan that he/ she does not own a house/flat. However, a member may acquire a house or a flat from a public agency/co-operative/ private builder by obtaining a loan from a bank at the normal rate of interest or from friends and relatives or through a hire-purchase scheme of Housing Board/ Development Authority. Thereafter, when the member becomes eligible for a loan under HLAS, he/she may approach the bank for such a loan to repay the loan(s) raised earlier from other sources.

9.1.2 There is no objection to bank loans under HLAS being utilised for foreclosing loans secured earlier from other sources, as a special case.

9.2 Classification of Deposits/Loans under HLAS

Under HLAS, the participating bank is required to accept deposits on behalf of NHB and make use of these deposits by way of refinance under any scheme approved by NHB from time to time. The surplus funds, if any, not so utilised (i.e. excess of deposits over refinance) can either be remitted by the participating bank to NHB or retained by it, subject to compliance with the statutory reserve requirements as under:

  1.        i.            The deposits under the HLA Scheme are on a recurring basis; and they should be treated as ‘time’ liabilities, subject to reserve requirements under Section 42(1) of the Reserve Bank of India Act, 1934 as also under Section 24 of the Banking Regulation Act, 1949 and included under item II (a) (ii) of Form ‘A’.
  2.      ii.            In terms of sub-clause (ii) of clause I of the Explanation to Sub-Section (1) of Section 42 of the RBI Act, as amended by clause 3 of the Second Schedule to the National Housing Bank Act, 1987, ‘liabilities’ will not include any loan taken from NHB. Hence, the deposits utilised as refinance from NHB should be deducted from the total deposits received under the HLA Scheme while including the amount under item II (a) (ii) of Form ‘A’.

10. BANK’S EXPOSURE TO REAL ESTATE SECTOR

While the development of real estate is welcome, there is a need for the banks to curb the excessively risky lending by exercising selectivity and strengthening the loan approval process. Banks should ensure that the borrowers should have obtained prior permission from government/local governments/other statutory authorities for the project, wherever required. While the proposals could be sanctioned in normal course, the disbursements should be made only after the borrower has obtained requisite clearances from the government authorities.

11. RISK WEIGHT ON HOUSING FINANCE

Banks may refer to Master Circular on Prudential guidelines on Capital Adequacy and Market Discipline – Implementation of the New Capital Adequacy Frame Work.

12. LOAN TO VALUE (LTV) RATIO

In order to prevent excessive leveraging, the LTV ratio in respect of housing loans should not exceed 80 per cent. However, for small value housing loans i.e. housing loans up to Rs. 20 lakh (which get categorized as priority sector advances), the LTV ratio should not exceed 90 per cent.

It has been brought to our notice that banks adopt different practices for deciding the value of the house property while sanctioning housing loans. Some banks include stamp duty, registration and other documentation charges in the cost of the house property. This overstates the realisable value of the property as stamp duty, registration and other documentation charges are not realisable and consequently the margin stipulated gets diluted. Accordingly, banks should not include these charges in the cost of the housing property they finance so that the effectiveness of LTV norms is not diluted.

13. DELHI HIGH COURT ORDER ON UNAUTHORISED CONSTRUCTION

The Monitoring Committee constituted by the Hon’ble High Court of Delhi regarding Unauthorised Construction, Misuse of Properties and Encroachment on Public Land, has issued the following directions for immediate compliance by the banks/ Financial Institutions.

A. Housing Loan for building construction

i) In cases where the applicant owns a plot/land and approaches the banks/FIs for a credit facility to construct a house, a copy of the sanctioned plan by competent authority in the name of a person applying for such credit facility must be obtained by the Banks/FIs before sanctioning the home loan.

ii) An affidavit-cum-undertaking must be obtained from the person applying for such credit facility that he shall not violate the sanctioned plan, construction shall be strictly as per the sanctioned plan and it shall be the sole responsibility of the executants to obtain completion certificate within 3 months of completion of construction, failing which the bank shall have the power and the authority to recall the entire loan with interest, costs and other usual bank charges.

iii) An Architect appointed by the bank must also certify at various stages of construction of building that the construction of the building is strictly as per sanctioned plan and shall also certify at a particular point of time that the completion certificate of the building issued by the competent authority has been obtained.

B. Housing Loan for purchase of constructed property/ built up property

i) In cases where the applicant approaches the bank/FIs for a credit facility to purchase the built up house/flat, it should be mandatory for him to declare by way of an affidavit-cum-undertaking that the built up property has been constructed as per the sanctioned plan and/or building bye-laws and as far as possible has a completion certificate also.

ii) An Architect appointed by the bank must also certify before disbursement of the loan that the built up property is strictly as per sanctioned plan and/or building bye-laws.

C. Unauthorised colonies

No loan should be given in respect of those properties which fall in the category of unauthorized colonies unless and until they have been regularized and development and other charges paid.

D. Commercial Property

No loan should also be given in respect of properties meant for residential use but which the applicant intends to use for commercial purposes and declares so while applying for loan.

14. TERMS AND CONDITIONS FOR BANKS’ INVESTMENT IN MORTGAGE BACKED SECURITIES (MBS)

14.1 Banks’ investments in MBS should satisfy the following terms and conditions:

(i) The right, title, and interest of an HFC in securitised housing loans and receivables there under should irrevocably be assigned in favour of a Special Purpose Vehicle (SPV) / Trust.

(ii) Mortgaged securities underlying the securitised housing loans should be held exclusively on behalf of and for the benefit of the investors by the SPV/Trust.

(iii) The SPV or Trust should be entitled to the receivables under the securitised loans with an arrangement for distribution of the same to the investors as per the terms of the issue of MBS. Such an arrangement may provide for appointment of the originating HFC as the servicing and paying agent. However, the originating HFC participating in a securitisation transaction as a seller, manager, servicer or provider of credit enhancement of liquidity facilities,

  1. a.    shall not own any share capital in the SPV or be the beneficiary of the Trust used as a vehicle for the purchase and securitisation of assets. Share capital for this purpose shall include all classes of common and preferred share capital.
  2. b.    shall not name the SPV in such manner as to imply any connection with the bank.
  3. c.     shall not have any directors, officers, or employees on the board of the SPV unless the board is made of at least three members and where there is a majority of independent directors. In addition, the official (s) representing the bank will not have veto powers.
  4. d.    shall not directly or indirectly control the SPV, or
  5. e.     shall not support any losses arising from the securitisation transaction or by investors involved in it or bear any of the recurring expenses of the transaction.

(iv) The loans to be securitised should be loans advanced to individuals for acquiring /constructing residential houses which should have been mortgaged to the HFC by way of exclusive first charge.

(v) The loans to be securitised should be accorded an investment grade credit rating by any of the credit rating agencies at the time of assignment to the SPV.

(vi) The investors should be entitled to call upon the issuer-SPV to take steps for recovery in the event of default and distribute the net proceeds to the investors as per the terms of issue of MBS.

(vii) The SPV undertaking the issue of MBS should not be engaged in any business other than the business of issue and administration of MBS of individual housing loans.

(viii) The SPV or Trustees appointed to manage the issue of MBS should have to be governed by the provisions of Indian Trust Act, 1882.

14.2 If the issue of MBS is in accordance with the terms and conditions stated in above paragraph and includes irrevocable transfer of risk and reward of housing loan assets to the SPV / Trust, investment in such MBS by any bank would not be reckoned as an exposure on the HFC originating the securitised housing loan. However, it would be treated as an exposure on the underlying assets of the SPV/ Trust.


Appendix

List of Circulars consolidated by Master Circular on Housing Finance

Sl.

Circular No.

Date

Subject

1

DBOD.No.BP.BC.78/08.12.001/2011-12 03.02.12 Housing loans by Commercial Banks-Loan to Value (LTV) Ratio

2

DBOD.BP.BC.No.45/08.12.015/2011-12 03.11.11 Guidelines on Commercial Real Estate(CRE)

3

DBOD.Dir.BC.No.93 /08.12.14/ 2010-11 12.05.11 National Disaster Management Guidelines on Ensuring Disaster Resilient construction of Buildings and Infrastructure.

4

DBOD.No.BP.BC.69/08.12.001/2010-11  23.12.10 Housing Loans by Commercial Banks – LTV Ratio, Risk Weight and Provisioning

5

DBOD.No. Dir(Hsg). BC.31/ 08.12.001/2009-10 27.08.09 Finance for Housing Projects – Incorporating clause in the terms andconditions to disclose in Pamphlets / Brochures / advertisements information regarding mortgage of property to the bank.

6

DBOD.Dir.(Hsg.)BC.27/ 08.12.01/2007-08 22.08.07 Discontinuance of quarterly statement on housing finance disbursements

7

DBOD.Dir.BC.No.43/ 21.01.002/2006-07 17.11.06 Housing Loans- Orders of the Delhi High Court – Writ Petition by KalyanSanstha Welfare Organisation against Union of India and Others – Implementation of Directions

8

DBOD.BP.BC.1711/08.12.14/2005-06 12.06.06 Adherence to National Building Code (NBC) Specifications necessary for lending institutes

9

DBOD. No.BP.BC.65/ /08.12.01/2005-06    01.03.06 Banks’ Exposures to Real Estate Sector

10

DBOD.BP.BC.61/ 21.01.002/ 2004-05 23.12.04 Mid-Term Review of the Annual Policy Statement for the year 2004-05-Risk Weight on housing loans and consumer credit

11

RPCD. No. Plan. BC. 64/ 04.09.01/ 2004-05 15.12.04 Priority Sector Lending- Investment in special bonds issued by specified institutions

12

RPCD.PLNFS.BC.No. 44/ 06.11.01/ 2004-05 26.10.04 Priority Sector Lending-Housing Loan: Enhancement of Ceiling

13

DBOD(IECS).No.4/ 03.27.25/ 2004-05 03.07.04 Freedom granted to banks to lay down the period within which the borrowers are required to construct the house on the  plot purchased

14

IECD. No. 14/ 01.01.43/ 2003-04 30.06.04 Merger of functions of IECD with other departments

15

RPCD. No. PLNFS. BC. 92/ 06.11.01/ 2002-03 29.04.03 Priority Sector Advances – Loans for Housing

16

RPCD.No.PLNFS.BC. 30/06.11.01/ 2002-03 29.10.02 Priority Sector Advances-Repairs to damaged houses in Rural and other areas

17

DBOD.No.BP.BC.106/ 21.01.002/ 2001-02 14.05.02 Risk Weight on Housing Finance and Mortgage Backed Securities

18

IECD.No.(HF)5/03:27: 25/ 99-2000 29.10.99 Housing Finance – Modification in Loan Size

19

IECD.No.(HF)12/ 03.27.25/98-99 15.01.99 Terms and Conditions Governing Direct Finance for Purchase of Old House

20

IECD.No.(HF) 40/03.27.25/97-98 16.04.98 Terms and Conditions Governing Direct Housing Loans – Review of Parameters

21

IECD.No.HF.37/ 03.27.25/97-98 27.02.98 Submission of Half-yearly Housing Finance Statements – Discontinuance

22

IECD.No.HF. 22/03.27.25/97-98 06.12.97 Housing Finance – Modification in Loan Size

23

RPCD. No. PLNFS. BC. 37/ 06.11.01/ 97-98 21.10.97 Priority Sector Advances- Loans for Housing

24

IECD.No.5/03.27.25/97-98 30.08.97 Quantum of Bank Finance to Housing Finance Companies Entitled to Draw Refinance from National Housing Bank (NHB)

25

IECD.No.CMD. 8/03:27:25/95-96 27.09.95 Sanction of Term Loans for Housing Projects Involving Budgetary Support from Government – Non-Permissibility of

26

IECD.No.1/03.27.25/94-95 11.07.94 Direct Housing Finance

27

DBOD.No.BL.BC. 132/C.168(M)-91 11.06.91 Opening of Specialised Housing Finance Branches

28

DBOD.No.BP.BC.88/60-90 05.04.90 Home Loan Account Scheme (HLAS) of National Housing Bank – Foreclosure of Loans Obtained from Other Sources

29

IECD.No.CMD.IV. 24/HF(P)-89/90 30.03.90 Housing Finance

30

DBOD.No.BP.1074/BP.60-90 23.03.90 Housing Finance – Designation of Specific Branches

31

DBOD.No.BP.1022/BP.60-90 15.03.90 Housing Finance – Designation of Specific Branches

32

DBOD. No. Ret.BC. 75/ C.96-90 13.02.90 The Reserve Bank of India Scheduled Banks Regulation, 1951- Classification of Deposits Accepted under the Home Loan Account Scheme of the National Housing Bank

33

IECD.No.CAD.IV. 223/(HF-P)- 88/89 02.11.88 Housing Finance – Modifications on the basis of the recommendations of the Study Group on Housing Finance Institutions

34

DBOD.No.CAS.BC. 70/C.446(HF-P)-81 05.06.81 Housing Finance – Revised Guidelines (General)

35

DBOD.No.CAS.BC.71/ C.446(HF-P)-79 31.05.79 Housing Finance – Recommendations of the Working Group to Examine the Role of Banking System in Providing Finance for Housing Scheme

 

BMRDA/BIAPPA/APA/HPA/NPA- APPROVALS DOES NOT MEAN THAT TITLES ARE CLEAR


BMRDA/BDA AND DC CONVERSION ORDERS OR LAYOUT APPROVALS DOES NOT CONFER ANY RIGHT, TITLE AND INTEREST AND EVEN THAT KATHAS ISSUED BY THE BBMP. BMRDA/BDA/BBMP/DC APPROVALS ARE CRYSTAL CLEAR IN THEIR ORDERS THAT THE AUTHORITIES ARE NOT LIABLE NOR RESPONSIBLE FOR ANY KIND OF LITIGATION.  THE APPROVALS ARE GIVEN ON TECHNICAL BASIS ONLY.  ALL APPROVALS ARE TIME BOUND.

DC CONVERSION ORDERS AND BBMP BUILDING PLAN SANCTION ARE HIGHLY CONDITIONAL.  IF THE CONDITIONS ARE NOT COMPLIED WITH, THEN THE ORDERS OR SANCTIONS AUTOMATICALLY GETS CANCELLED WITHOUT EVEN ISSUING A NOTICE.

BUYERS ARE BEING DUPED BY DECLARING THAT THE LAYOUT IS APPROVED BY BANKS.  BANK APPROVAL OR LOAN APPROVAL DOES NOT CONFER ANY TITLE.

1). ONE SUCH A CASE OF BMRDA APPROVED LAYOUT, VERY CLOSE TO CHANDAPURA CIRCLE, ON HOSUR ROAD IS UNDER LITIGATION.(MOST RECENT LITIGATION) IT IS A GATED(ILLEGAL) COMMUNITY.

2). IN ANOTHER VERY RECENT EXAMINATION, THE APA APPROVED LAYOUT NEAR JIGNI, THE DEVELOPER HAS ALL THE APPROVALS AND BANK APPROVALS TOO, BUT THERE ARE OTHER LEGAL HEIRS, WHO HAVE NOT ACCEPTED THIS TRANSACTION BETWEEN THEIR ANCESTORS AND THE DEVELOPERS.

 

BEWARE, BEFORE BUYING BMRDA OR DC CONVERTED SITES.

Service tax on construction services-A clarification from the department


Circular No. 151/2/2012-ST F.No.332/13 /2011-TRU New Delhi, 10th February, 2012 Subject: Service tax on construction services — regarding. Many issues have been referred by the field formations, in the recent past, seeking clarification regarding the levy and collection of service tax on construction services [clauses (zzq),(zzzh) of section 65(105) of the Finance Act, 1994], in the light of varying business models. Across the country, divergent business models and practices are being followed in the construction sector. Some of these business models and practices could be region specific. 2. From the issues referred by the field formations, important ones have been identified model wise, examined and clarified as follows: 2.1. Tripartite Business Model (Parties in the model: (i) landowner; (ii) builder or developer; and (iii) contractor who undertakes construction): Issue involved is regarding the liability to pay service tax on flats/houses agreed to be given by builder/developer to the land owner towards the land /development rights and to other buyers. Clarification: Here two important transactions are identifiable: (a) sale of land by the landowner which is not a taxable service; and (b) construction service provided by the builder/developer. The builder/developer receives consideration for the construction service provided by him, from two categories of service receivers: (a) from landowner: in the form of land/development rights; and (b) from other buyers: normally in cash. (A) Taxability of the construction service: (i) For the period prior to 01/07/2010: construction service provided by the builder/developer will not be taxable, in terms of Board’s Circular No.108/02/2009-ST dated 29.01.2009. (ii) For the period after 01/07/2010, construction service provided by the builder/developer is taxable in case any part of the payment/development rights of the land was received by the builder/ developer before the issuance of completion certificate and the service tax would be required to be paid by builder/developers even for the flats given to the land owner. (B) Valuation: (i) Value, in the case of flats given to first category of service receiver, is determinable in terms of section 67(1)(iii) read with rule 3(a) of Service Tax (Determination of Value) Rules, 2006, as the consideration for these flats i.e., value of land / development rights in the land may not be ascertainable ordinarily. Accordingly, the value of these flats would be equal to the value of similar flats charged by the builder/developer from the second category of service receivers. In case the prices of flats/houses undergo a change over the period of sale (from the first sale of flat/house in the residential complex to the last sale of the flat/house), the value of similar flats as are sold nearer to the date on which land is being made available for construction should be used for arriving at the value for the purpose of tax. Service tax is liable to be paid by the builder/developer on the ‘construction service’ involved in the flats to be given to the land owner, at the time when the possession or right in the property of the said flats are transferred to the land owner by entering into a conveyance deed or similar instrument(eg. allotment letter). (ii) Value, in the case of flats given to the second category of service receivers, shall be determined in terms of section 67 of the Finance Act, 1994. 2.2 Redevelopment including slum rehabilitation projects: Generally in this model, land is owned by a society, comprising members of the society with each member entitled to his share by way of an apartment. When it becomes necessary after the lapse of a certain period, society or its flat owners may engage a builder/developer for undertaking re-construction. Society /individual flat owners give ‘No Objection Certificate’ (NOC) or permission to the builder/developer, for re-construction. The builder/developer makes new flats with same or different carpet area for original owners of flats and additionally may also be involved in one or more of the following: (i) construct some additional flats for sale to others; (ii) arrange for rental accommodation or rent payments for society members/original owners for stay during the period of re-construction; (iii) pay an additional amount to the original owners of flats in the society. Clarification: Under this model, the builder/developer receives consideration for the construction service provided by him, from two categories of service receivers. First category is the society/members of the society, who transfer development rights over the land (including the permission for additional number of flats), to the builder/developer. The second category of service receivers consist of buyers of flats other than the society/members. Generally, they pay by cash. (A) Taxability: (i) Re-construction undertaken by a building society by directly engaging a builder/developer will not be chargeable to service tax as it is meant for the personal use of the society/its members. Construction of additional flats undertaken as part of the reconstruction, for sale to the second category of service receivers, will also not be a taxable service, during the period prior to 01/07/2010; (ii) For the period after 01/07/2010, construction service provided by the builder/developer to second category of service receivers is taxable in case any payment is made to the builder/ developer before the issuance of completion certificate. (B) Valuation: Value, in the case of flats given to second category of service receivers, shall be determined in terms of section 67(1)(i) of the Finance Act, 1994. 2.3 Investment model: In this model, before the commencement of the project, the same is on offer to investors. Either a specified area of construction is earmarked or a flat of a specified area is allotted to the investors and as it happens in some places, additionally the investor may also be promised a fixed rate of interest. After a certain specified period an investor has the option either to exit from the project on receipt of the amount invested alongwith interest or he can re-sell the said allotment to another buyer or retain the flat for his own use. Clarification: In this model, after 01/07/2010, investment amount shall be treated as consideration paid in advance for the construction service to be provided by the builder/developer to the investor and the said amount would be subject to service tax. If the investor decides to exit from the project at a later date, either before or after the issuance of completion certificate, the builder/developer would be entitled to take credit under rule 6(3) of the Service Tax Rules, 1994( to the extent he has refunded the original amount). If the builder/developer resells the flat before the issuance of completion certificate, again tax liability would arise. 2.4 Conversion Model: Conversion of any hitherto untaxed construction /complex or part thereof into a building or civil structure to be used for commerce or industry, after lapse of a period of time. Clarification: Mere change in use of the building does not involve any taxable service, unless conversion falls within the meaning of commercial or industrial construction service. 2.5 Non requirement of completion certificate / where completion certificate is waived or not prescribed: In certain states, completion certificates have been waived or are considered as not required for certain specified types of buildings. Doubts have been raised, regarding levy of service tax on the construction service provided, in such situations. Clarification: Where completion certificate is waived or is not prescribed for a specified type of building, the equivalent of completion certificate by whatever name called should be used as the dividing line between service and sale. In terms of the Service Tax (Removal of Difficulty) Order, 2010, dated 22/06/2010, authority competent to issue completion certificate includes an architect or chartered engineer or licensed surveyor. 2.6 Build- Operate – Transfer (BOT) Projects: Many variants of this model are being followed in different regions of the country, depending on the nature of the project. Build-Own-Operate-Transfer (BOOT) is a popular variant. Generally under BOT model, Government or its agency, concessionaire (who may be a developer/builder himself or may be independent) and the users are the parties. Risk taking and sharing ability of the parties concerned is the essence of a BOT project. Government or its agency by an agreement transfers the ‘right to use’ and/or ‘right to develop’ for a period specified, usually thirty years or near about, to the concessionaire. Clarification: Transactions involving taxable service take place usually at three different levels: firstly, between Government or its agency and the concessionaire; secondly, between concessionaire and the contractor and thirdly, between concessionaire and users, all in terms of specific agreements. At the first level, Government or its agency transfers the right to use and/or develop the land, to the concessionaire, for a specific period, for construction of a building for furtherance of business or commerce (partly or wholly). Consideration for this taxable service may be in the nature of upfront lease amount or annual charges paid by the concessionaire to the Government or its agency. Here the Government or its agency is providing ‘renting of immovable property service’ (renting of vacant land to be used for furtherance of business or commerce) and in such cases the concessionaire becomes the service receiver. In this model, though the concessionaire is undertaking construction of a building to be used wholly or partly for furtherance of business or commerce, on the land provided by the government or its agency for temporary use, he will not be treated as a service provider since such construction has been undertaken by him on his own account and he remains the owner of the building during the concession period. At the second level, transaction can take place between a concessionaire and the contractor. Where the concessionaire himself does not have exposure to construction sector, he may engage a contractor for undertaking construction of a building on the land, in respect of which right to use has been obtained in his favour, from the Government or its agency. If the concessionaire is himself a builder/developer, this level of transaction may not arise. Where an independent contractor is engaged by a concessionaire for undertaking construction for him, then service tax is payable on the construction service provided by the contractor to the concessionaire. At the third level, the concessionaire enters into agreement with several users for commercially exploiting the building developed/constructed by him, during the lease period. For example, the user may be paying a rent or premium on the sub-lease for temporary use of immovable property or part thereof, to the concessionaire. At this third level, concessionaire is the service provider and user of the building is the service receiver. The concessionaire may provide to the users, taxable services such as ‘renting of immovable property service’, ‘business support service’, ‘management, maintenance or repair service’, ‘sale of space for advertisement’, etc. Service tax is leviable on the taxable services provided by the concessionaire to the users. There could be many variants of the BOT model explained above and implications of tax may differ. For example, at times it is possible that the concessionaire may outsource the management or commercial exploitation of the building developed/constructed by him, to another person and may receive a pre-determined amount as commission. Taxable service here will be business auxiliary service and service tax is leviable on the commission. (A) Taxability: (i) the service provided by the Government or its agency to the concessionaire is liable to service tax; (ii) the construction services provided by the contractor to the concessionaire would be examined from the point of taxability as to whether the activity is not otherwise excluded; (iii) the services provided by the concessionaire to the user of the facility are liable to service tax; (B) Persons liable to pay tax: Government or its agency and concessionaire are liable to pay tax on the services being provided by them. There could be several other persons liable to pay service tax, depending on the variant of the BOT model followed. 2.7 Joint Development Agreement Model: Under this model, land owner and builder/developer join hands and may either create a new entity or otherwise operate as an unincorporated association, on partnership /joint / collaboration basis, with mutuality of interest and to share common risk/profit together. The new entity undertakes construction on behalf of landowner and builder/developer. Clarification: Circular 148/17/2011-ST dated 13/12/2011, particularly paragraphs 7, 8, 9 apply mutandis mutandis in this regard.

3. This Circular may be communicated to the field formations and service tax assessees, through Trade Notice/ Public Notice. Hindi version to follow. (Samar Nanda) Under Secretary, TRU

B-KATHA – HOME LOANS


IT HAS COME TO OUR NOTICE THAT SOME BANKS ARE OFFERING HOME LOANS ON `B` KATHAS.  

PLEASE DO NOT SEEK THE DETAILS OF THE BANKS, WHICH ARE OFFERING IT,FROM US.

THE SANCTION/OFFER OF LOAN WILL NOT CONFER ANY RIGHT, TITLE AND INTEREST AND THE BUYERS ARE ADVISED TO BE VERY CAUTIOUS BEFORE THE PURCHASE.  THIS IS FOR YOUR INFORMATION.

HOME LOANS AND GOVT PROPERTY -LAND GRABBING AND ENCROACHMENTS – BORROWERS ARE IN DOCK !


IT IS SAID THAT THE PROPERTIES IN THE VICINITY OF TANK BEDS,GOMALA LANDS, KAALU DHARI, BANDI DHARI,GUNDU THOPU, CA SITES IN BANGALORE EAST, NORTH, NORTH ADDITIONAL, ANEKAL AND SOUTH TALUKS, WHICH BELONGS TO GOVERNMENT SOLD ON FAKE/FABRICATED/GRANT CERTIFICATES/CERTIFIED COPIES OF BOGUS DOCUMENTS TO BUILDERS AND LAND MAFIA HAVE CONSTRUCTED MANY APARTMENTS AND THE BANKS HAVE SANCTIONED HOME LOAN ON SUCH PROPERTIES.  IT IS WIDELY DISCUSSED IN GOVERNMENT CIRCLES AND BANKING CIRCLES THAT THE BORROWER IS TOTALLY LIABLE AND RESPONSIBLE TO REPAY THE LOAN, IF THE GOVERNMENT TAKES OVER OR CLEARS THE ENCROACHMENT OR RECOVER THE LAND.  EVEN THE JUDICIARY MIGHT NOT COME TO THE HELP IN SUCH A SITUATION OF LAND GRABBING AND ENCROACHMENT.

Pre closure/foreclosure charges for home loans – Government Directions –


Government, in May 2010, advised Public Sector Banks, Indian Banks’ Association and National Housing Bank that no pre-payment charges may be levied by the lending institutions when the loan amount is paid by the borrowers out of their own funds; and if any pre-payment charges are to be imposed on housing loans, the same need to be reasonable and transparent and not out of line with the average cost of providing these services. 
The Public Sector Banks (PSBs) have reported that by and large they do not levy any pre-payment charges when the amount is paid by the borrowers from their own sources. 

In general, own funds means funds generated through ‘own sources’ and not through borrowings by any lender. Prepayment of loan by a borrower can take place on account of (i) takeover of his / her loan by other lender, and (ii) out of their own sources. In the first case, the borrower often gets their existing loan refinanced by other lender, if the interest rate offered by other lending institution in the market was lower and attractive. 

In terms of RBI guidelines, in the context of granting greater functional autonomy to banks, freedom has been given to scheduled commercial banks, including public sector banks, private sector banks and foreign banks, on all operational matters pertaining to banking transactions.