Heavy Rains and Floods in Bengaluru

Above normal seasonal rains were predicted by the IMD and the intimation sent to the civic authorities but the low lying residential areas, supposed to be in the line of flood zone were not intimated or informed.

It is natural for the rainwater to flow on the low gradients and the NGT specified 50-meter buffer zone for the safety of the citizens and for the easy flow of the water, but many revenue, DC Converted, illegal buildings, unauthorised layouts and structures blocked the free flow of rainwater in the normal water channels, whereby it enters the low gradient zones.

More downpour is expected in a couple of days and the civic authorities must immediately take appropriate steps to stop the flow of rainwater in residential zones.

Most of the B Katha and revenue sites are on the battle zone.


True Story was told about the impending demolition way back in 2008 – A press Report

A retired police sub-inspector has been running from pillar-to-post to stop encroachments at Kasavanhalli since 2008. He says none of his pleas were ever heard, which led to large-scale encroachment. The recent downpours, however, finally woke the state government and BBMP to the problem and begin demolitions. S Hanumanna says if civic agencies had woken up earlier then people’s money could well have been saved.

The 62-year-old has now got some closure after seeing the civic agency demolishing structures that have encroached upon the SWD and lakebed. Speaking to Bangalore Mirror he said, “I have been fighting for the restoration of SWDs for the past several years, but not one even bothered to listen to my petition. I even begged those who came here to buy properties not to do so as this is a lakebed and one fine day they would land in trouble. Now the BBMP has started the demolition of villas built on the other side of Kasavanahalli and Kaikondanhalli Lake and I feel that the demolitions will continue in Kasavanahalli village too.”

“There were many small ponds, used by cows, buffalo, and sheep, as a source of drinking water. I remember swimming in Kasavanahalli Lake when I was young. But the entire village and its surroundings have changed in the last decade. Random encroachment has taken place and the lake and drains have been filled in with mud and huge apartments and commercial complexes have come up on it. I should not blame buyers, as people sold them lakebed areas by giving them a neighbouring survey number, which is illegal. Today, however, the buyer is suffering as he has been fooled by the developer.”

Hanumanna, along with other residents of Kasavanahalli village — which was under the jurisdiction of Bommanahalli city municipal council and now falls under Mahadevapura zone of BBMP — met the joint commissioner on January 31, 2008 and submitted their grievances about alleged encroachments of drains and lakes. Later he claimed he personally gave a petition to the then BBMP commissioner Bharat Lal Meena on November 19, 2009, but his grievance was not heard.

“I have met officials. Instead of taking action and stopping the encroachments, which had just begun in those days, my petitions were forwarded from the top level to the bottom level. I have seen BBMP’s engineers visiting these commercial properties and collecting mamool [bribes] from them. I was helpless, but after the recent drive undertaken by the BBMP, I feel that Kasavanahalli village, which once had many waterbodies, will be restored,” he maintained.


If citizens with homes built on lakebeds or SWDs feel like there’s a sword hanging over their heads, they’re not alone. The latest demolition drive is also set to claim the careers of a few civic officials, who knowingly or unknowingly, helped people encroach on drains and into buffer zones by sanctioning their building plans.

Following chief minister Siddaramaiah’s order to conduct an inquiry into the recent flooding after Hulimavu Lake breached its banks mainly due to encroachment on SWDs in areas like Duo Enclave, additional chief secretary (urban development) Mahendra Jain is preparing a report.

Speaking to Bangalore Mirror Jain said: “I asked for certain files from the BBMP commissioner and they have reached my office. The affected areas were hit due to the recent rains, lake breaches and encroachments on SWDs. These are being checked and a report is being prepared.”

He is also checking who’s at fault for Hulimavu Lake breaching its banks and adversely affecting more than one lakh residents of the area and Silk Board-Rupen Agrahara junctions.

He said, “Every BBMP official’s role is being examined: Which official was responsible for the recent flooding and who allowed buildings to come up on drains. I have got all the information and the report is in its final stage. Action will also be initiated against engineers and town planning officials who sanctioned plans, and revenue staff for issuing khatas.”

Builders, residents, officials responsible
Meanwhile, the BBMP commissioner, in the council on Monday, held builders, residents and BBMP officials equally responsible for the mess. He said, “If civic officials hadn’t colluded with these builders and residents and sanctioned plans then we would have averted this kind of situation.”

“As per the CM’s order, additional chief secretary of urban development department is conducting an inquiry and we have submitted a set of files to him,” he added.
Files of Shubh Enclave have also been submitted to the additional chief secretary.


Lake Committee chairman, KB Koliwad, says Dollars Colony – where hundreds of VVIPs have plots and homes – will also be considered for demolition as reportedly the complete layout is built on Linganahalli lake. He says ministers, MLAs and many VVIPs were given sites there by the BDA and he is putting the final touches on his report and then action will be taken.

The fate of Dollars Colony in JP Nagar VII phase hangs in the balance as records, now in the public domain, indicate that the BDA had no legal basis to form the layout.
Koliwad says that the complete layout is illegal. He states that even the present CM had a site in the layout, which he eventually sold. Around 400 VVIPs are alleged to have homes or plots in the layout.

A 1988 government order excludes Linganahalli lake, Shivanagilu lake and Jakkaraya-nakere from the preservation list, saying they had lost the characteristics of a waterbody. However, the land was not transferred to the BDA and the 2014-15 RTC also shows the area as a lake. The state government denotified all land notified for the layout in 2001, 2002 and 2004. The BDA says that the layout was developed in Survey No 167 in Linganahalli lake, whereas records claim it is in Survey No 7 of Sarakki village.

Now, a complete enquiry has been carried out and all relevant documents have been collected. “We are yet to finalise some issues with this layout. It is confirmed that the land was originally a lake. I will not stop my work of finding encroached land, even if a VVIP owns it. A lake is a lake,” Koliwad said. Already a complaint about this layout is pending with Lokayukta and the BMTF is also conducting an investigation based on a complaint.

The BDA’s role

Last year when the Bengaluru district administration started a demolition drive on encroachment of lakebeds that included several layouts set up by the BDA like Dollars Colony, the government met with bitter criticism and the issue came up before the cabinet. With polls to the BBMP and local bodies around the corner, the state government decided that it would not touch those layouts till the House Committee submitted its report. According to the House Committee, the BDA came up with as many as 14 layouts in lake areas.

While the House committee supported the on-going demolition drive on either side of SWDs across Bengaluru, its repeated silence over the fate of encroachments by agencies like BDA has left the public fuming. When asked whether the House Committee has taken a stand against such encroachments by BDA on lakebeds, Koliwad refused to comment.

“You just wait a couple of months. We will not spare anybody. Our committee will submit its final report to the government by the end of October 2016,” Koliwad revealed.

More to follow?

Following the recent order by the National Green Tribunal on the measurement of SWDs and buffer zone around the lake, the House committee ordered a fresh survey of encroachments in light of the NGT’s latest verdict. The survey report, expected to be submitted next week, is likely to further expose rampant encroachment.

“The survey report about SWD encroachment and buffer zones by a team of officials is expected to be submitted to us by August 11 and thereafter we will be in a position to ascertain the extent of encroachment of SWDs and buffer zones of lakes and other water bodies,” Koliwad told the media.

Report on lakes

Probing the encroachment of lakes and water bodies over two years, the House Committee has decided to submit an extensive report that would resemble an “encyclopaedia of Bengaluru lakes”, according to Koliwad.

“We have collected data running to seven pages for each lake. Bengaluru has five taluks and four hoblis. Each hobli, on average, has 50 to 150 lakes thus the report runs into more than 8,000 pages,” he explained.

Lauding the CM’s stand on encroachers, Koliwad said, “There should be no mercy on encroachers. Be it influential people, socialites or VIPs, everybody who has encroached these water bodies must be punished severely. Just because of a few, society as a whole must not suffer. We will recommend booking of criminal cases against builders and developers.”


Corporators on Monday said the Bangalore Metropolitan Task Force (BMTF) did not have the power to file FIRs, and rather than having them quashed in the courts, the civic agency should file complaints with the local police.

R Satyanarayana, the Congress party’s ruling leader in the council, referred to Justice RB Budihal’s judgment, issued on February 24, 2015, in a case were several BBMP officials were accused by the BMTF. The judge maintained that in view of the provision under section 192A of the Karnataka Land Records Act, there is a bar on the BMTF registering FIRs.

Satyanarayana demanded that action to be taken against former officers of the city municipal council and town municipal council, who allegedly allowed rampant encroachment. He said, “The CM has made it clear that the administration won’t be compromising with builders or anyone else. Demolition will be undertaken mercilessly. Encroachment is the simple reason for the city being flooded and for this builders and officials are equally responsible.”

According to the KLR act section 192A – offences and penalties – if anyone unlawfully enters or occupies any government land with the intention of holding that
government land, they can face imprisonment for one year and a fine of Rs5,000 while anyone who cheats and thereby dishonestly creates documents for the purpose of selling, mortgaging or transferring by gift of any government land can face imprisonment for three years and fine of Rs10,000. The same punishment is earmarked for creating forged documents.



How long does it take the BBMP to mark five buildings that have encroached on an SWD in Ramachandrapura, in Yelahanaka? Eight years!

Continuing its drive against encroachers, civic officials demolished the compound walls of three buildings, and a canteen. No individual came forward to claim ownership for the canteen. The marking of properties was undertaken by Yelahanaka zone joint commissioner Sarfraz Khan.

Yelahanaka zone’s executive engineer Yarappa Reddy said, “This locality is notorious for goondaism. For the last eight years the revenue department was not allowed to do any kind of survey on encroachments and they were also not allowed to mark properties. But on Monday we did a quick survey and based on that we marked the buildings that are obstructing drains.”

Officials conducted a survey on a three-kilometre stretch of drain and discovered that five buildings had encroached upon the site to the tune of 20,000 sq ft. After the demolition, the BBMP has fenced off the drain.

While the demolition was taking place, several residents were skeptical about the BBMP’s identification process. Several residents demanded proper identification of drains. A verbal battle ensued after BBMP officials failed to produce documents claiming that the structures encroached on drains.

Ashok N, a resident who had occupied a small space for a nursery had a drain passing through it, which the BBMP claimed was obstructing the natural flow of water.

Ashok said, “A couple of ago years there was small lake called Hoskere, which was destroyed by land-grabbers. The direction of the original lake was diverted. We
allowed this drain to pass through as water was flowing through it. We didn’t build anything but our nursery which is fully covered with herbs and bushes.”

Pointing at the drain which was demolished, Yarappa Reddy said, “If you see the drain, you can easily say that the natural flow of water is obstructed. The drain should not be diverted. If people justify that the work done by us was wrong then we will compensate them.”

There was more drama at the demolition sites after a compound wall was demolished. V Prabhakar, a resident of the spot for 30 years, came running out of his house to stop the demolition. The BBMP had marked that four feet had to be demolished. Prabhakar then sought permission from officials to take up the demolition on his own.

Chief minister Siddaramaiah says preventing floods is of paramount importance

Supporting the demolition drive taken up by Bruhat Bengaluru Mahanagara Palike, chief minister Siddaramaiah on Monday clarified that the government does not want Bengaluru to go the Chennai way. Referring to the 2015 Chennai floods due to encroachment of storms and waterbodies the CM told media persons in Vidhana Soudha, “We do not want Bengaluru to face the Chennai situation and so are clearing out all encroachments.”

Saying that the government would spare none in this regard, he said, “Be it builders, developers or whoever it may be or however influential they are, all encroachers will be dealt uniformly.”

Replying that the government also has sympathy to those who are losing their houses, Siddaramaiah said, “We also need to think about inconvenience caused during the heavy rains. I am aware that a few of the officials too have erred and we will initiate action against such officers too. The people who bought properties on storm-water drains should have been more cautious before making the purchase. They cannot be causing floods by constructing houses on drains.”

BJP leaders in the meanwhile criticised the government’s decision to demolish houses of poor people, and has demanded that the government take action against officials and builders responsible for the mess. Through a press statement, Malavika Avinash, joint spokesperson of Karnataka BJP said, “The government in an attempt to hogwash its critics goes after the middle-class who become soft-targets by building homes upon encroached spaces sold to them by developers, while the bigger offenders like large construction companies, owners of tech-parks, malls and multiplexes stay out of their bounds. The government must also crack down on large-scale builders, owners of tech parks, malls and multiplexes that have encroached on waterbodies.”


Siddaramaiah rules out halting demolition drive by BBMP

Chief Minister Siddaramaiah on Monday said there was no question of stopping the BBMP’s ongoing drive to demolish structures on stormwater drains.

“The properties of builders and developers – however influential they might be – which have come up on lakebeds and stormwater drains, will not be spared. The government will not succumb to any sort of pressure,” Siddaramaiah told reporters on the sidelines of an event in Bengaluru.

He rubbished charges that the government was targeting only the poor and middle-class families. “If the drive is not taken up, there will be disastrous repercussions every time it rains. Thousands will have to suffer due to waterlogging and flooding. Bengaluru can turn into another Chennai,” Siddaramaiah said, referring to last year’s floods in the Tamil Nadu capital. The chief minister said houses constructed on lakebeds were bound to be flooded when it rains, but ultimately the BBMP had to take the blame. He said an enquiry has already been ordered against officials who had violated rules by permitting such constructions. Action will be initiated against such officials, he said.

Siddaramaiah has also sought details of encroachment of rajakaluves (stormwater drains/ feeder canals) which had led to flash floods on July 28 and 29.

Replying to queries on the demolition drive to evict encroachment of rajakaluves, in the BBMP Council on Monday, Commissioner N Manjunatha Prasad said the chief minister has asked him to fix the responsibility on the officials who issued ‘A’ Khatha (revenue document) and sanctioned building plans on the rajakaluves.

Prasad told the Council that the width of a primary stormwater drain at Kasavanahalli was reduced from 50 metres to 10 metres.

He said Avani Sringeri Nagar Layout and Shubh Enclave were among those formed on stormwater drains.

The chief minister has assigned Additional Chief Secretary for Urban Development Department, Mahendra Jain, to head the panel to look into the files pertaining to the approvals and initiate criminal action against the officials responsible for giving permission. The Joint Commissioner of Bommanahalli Zone has been directed to provide the files.

Defending the encroachment-clearance drive, chief minister Siddaramaiah on Monday said the government does not want Bengaluru to face a Chennailike post-deluge situation.
He was referring to the havoc wreaked by the December 2015 floods in Chennai where a major portion of the city was inundated. More than 100 persons were killed and collateral damage was pegged at over Rs 20,000 crore. One of the prime reasons attributed to flooding was encroachment of marshlands.

Siddaramaiah said Bengaluru faces a similar threat because of rampant encroachment of storm water drains.The BBMP had identified 1,923 encroachments and intensified the anti-encroachment drive three days ago.
Though pressure was being mounted on the government by realtors and families whose houses are being demolished, Siddaramaiah refused to slow down the drive currently being carried out in south Bengaluru. “Action will be taken against violators, irrespective of how powerful or influential they are. The people who bought properties on storm water drains should have been more cautious while making the purchase. They cannot be causing floods by constructing houses on drains,” he said.
To a question on the role of officials in giving permission for properties on encroached land, Siddaramaiah said: “We know officials have made mistakes, but that does not mean people have not erred. Moreover, these mistakes happened during the previous governments, and not our tenure. If we don’t act tough against encroachments now, we’ll face problems in future. We have already seen flooding in parts of BTM Layout and Bommanahalli last week because of encroachment of storm water drains. Do you expect us to sit quiet in such circumstances?”
Panel’s findings
The legislature committee on encroachment of lakes will submit its findings to the government by October-end this year. Committee chairman KB Koliwad said the preliminary report on encroachment of SWDs and lake buffer zones will be submitted after officials deliver the 8,000-page report on August 11.
Based on inputs collected by the committee during inspections, Koliwad said: “Encroachment of lakes is a serious issue and cannot be neglected. We found that most encroachments are by builders in collusion with surveyors.We’ll recommend booking of criminal cases against such builders and that their properties should be forfeited. We’ll review claims of property owners and take a decision if they have to be compensated.”


The scene at, Kasavanahalli, off Sarjapur Road, looked surreal on Saturday and Sunday. An army of BBMP workers descended and JCBs rolled into the layout, pulling down houses as clueless residents watched. BBMP’s drive to clear encroachments on storm water drains, was incidentally based on a 1904 map of Kasavanahalli village.

The 1904 map, a copy of which is with TOI, is pastoral, with vast swathes of land marked by thickets.

The two lakes at the two extremes of the village -Kasavanahalli Lake to the south and downstream Kaikondarahalli Lake to the north -are linked by a network of drains. The BBMP claims that many residences in Shubh Enclave stand on this network of drains, affecting the flow of rainwater.

“Are you telling us that such an old map, which goes back 113 years, counts even today? The landscape has changed and so has the course of water. How can this be referred to as accurate information strong enough to bring down our homes?
There have been at least three occasions in the past when the survey department has come down here and changed the markings of the storm water drain which passes through the enclave. We don’t know where the drain is,” said a resident, who wanted to remain anonymous.

“There might be over 50 tertiary drains running through this area, and we were handling it pretty well until BBMP interfered and insisted on removing so-called encroachments from these drains as well,” he added.

“The village maps were available on the revenue department website in January this year, and were not accessible in between for rea sons we don’t know. When I checked on Sunday , it still wasn’t working.But today it is up and running smoothly ,” said Sudhir, a member of Bellandur Forum, checked the website frequently .

Hundreds or even thousands of buildings will need to be demolished if BBMP uses village maps as its guide to determine where the drains once where. According to revenue department records, there are 308 villages in BBMP limits including Koramangala and Peenya.
“Where were these maps when officials were handing us occupancy certificates and even A khatas?
Didn’t they know these areas are sensitive zones and we would be sitting on storm water drains?” asked Shanta M, whose house was partially demolished in Bommana halli zone.
AN Yellappa Reddy, environmentalist, said village maps were the only solid proof to show the land many were sitting on is government property. “The village maps are just basic records to prove it is government land. They identify sensitive areas that shouldn’t be diverted for any sort of development. In the old days, locals had identified the sensitive zones and built tanks and storm water drains and valleys after identifying them as hydrological entities, to try and save every drop of water. In 1978, green belt areas were identified and safeguarded from all development.

“Subsequently, the green belt has been tampered with continuously and encroached. The 1904 maps identified everything, including areas earmarked for cattle.Those basic records might not work now, but the government has nothing else to refer to,” he added.


With demolitions in Bommanahalli, Mahadevapura and Yelahanka igniting public anger, BBMP commissioner N Manjunath Prasad on Monday told the BBMP council the additional chief secretary has started an inquiry against municipal officers who allowed constructions on lakebeds and storm water drains. “All original documents pertaining to constructions on storm water drains are being handed over to the officer who has been asked by the chief minister to conduct the probe. Criminal cases will be filed against officers who sanctioned plans for construction on storm water drains and issued oc cupancy certificates. The exercise will be expanded to other parts of the city,” the commissioner said.
Prasad made the announcement following widespread criticism by corporators and Bommanahalli MLA Satish Reddy of inaction against officers who allowed en croachments to come up on water bodies. “Has a single FIR been filed or any other proceedings initiated against officers who violated norms by giving permission for construction on storm water drains?” Reddy asked. The BBMP chief ad mitted that the BBMP sanctioned plans and gave permissions even after the flood-prone zones were handed over by erstwhile city municipal councils. “Just like builders and encroachers, BBMP officers are equally responsible for the damage we see today . In Kasavanahalli, Mahadevapura, where demolition is going on, 20 metres of SWD was encroached upon, and apartments came up. While some constructions came up with sanction from erstwhile gram panchayats, plans were sanctioned as recently as last year,” he added. Prasad didn’t mention a deadline for completing the investigation.
Mayor BN Manjunath Reddy said they are considering writing to the state government to probe the role of sub-registrars in the large-scale encroachments.
“Sub-registrars must be made accused number 1 in storm water drain cases. How can they allow the sale of such properties to private individuals?” he asked. He denied the civic body has been selective in the demolitions.
“We will not spare anybody and are not yielding to any pressure.Any officer whose guilt is proved will face legal action,” he added.


In the same Ashub area, one of the Builders, residing and the native of the same area, Converted the lands and sold the sites.  The buyers could not get the sites regularized.  Inspite of  blanket ban, few owners GOT THE `A`KATHA, from BBMP and have also sold it.  Few have built houses and few have built apartments on such sites in Ambalipura and Haralur. Inspite of repeated warning, many have bought properties, as the banks have financed the purchase, especially a state owned bank and another blue bank.


Residents, officials spar over changes in drain alignment

The width of secondary drain that connects the main rajakaluve was five metres until last weekend. On Monday, the residents of Shubh Enclave in Kasavanahalli woke up to a new plan that left them furious.

This is the same area where a posh villa and two buildings under construction were razed on Saturday and Sunday to make way for the stormwater drain from Kasavanahalli to Kaikondrahalli in the Mahadevapura Assembly constituency.

On Monday, there was a heated argument between local residents and officials over the alignment of stormwater drain. Residents of Shubh Enclave, which comprises around 100 houses were angry after officials changed the width of secondary drain from five metres to 7.4 metres. “We are not sure which building will be brought down next. What if the BBMP officials demolish a house without confirming whether it has been built illegally? We do not want to take a chance. We have right to see the village map and cannot depend on the wisdom of one surveyor. The houses have been constructed spending our hard-earned money,” said Vanitha Choonthur, residents’ association member.

“Why are you not sticking to one map? Put the map that you are referring in the public domain? You are changing the alignment of the drain only to favour the rich and powerful,” argued residents.

A BBMP official said that consisting of three secondary drains and two main drains, the rajakaluve connects two interlinking lakes (Kasavanahalli and Kaikondrahalli). Shubh Enclave is located on the downstream. As many as 28 properties including buildings that have illegally come up on the rajakaluve would be cleared during the drive, he added. The demolition drive will resume on Tuesday.

Geetha Pillai, a resident was worried that the officials would mess up with the map to favour the rich. “We will not let our houses being razed unless BBMP officials prove that this is a rajakaluve,” she said.

Ravichandra Reddy, a retired employee was angry when BBMP men went onto demolish his compound wall to save the portion of a posh neighbouring house being razed.

Mahendra Kumar, a software firm employee who lost his posh villa during the drive claimed that his house was demolished to favour the builder. There were similar complaints from residents of Avani Sringeri Nagar in Arakere on re-aligning the drains to favour the powerful.

Meanwhile, BBMP officials said they were going by the village map. The width of rajakaluve varies from different points, from five metres to 20 metres.





Master Circular on Housing Finance

Date: Jul 01, 2011

RBI/ 2011-12/52
DBOD. No.DIR.BC. 03/08.12.001/2011-12
July 1, 2011
10 Aashada, 1933 (Saka)
All Scheduled Commercial Banks
(excluding RRBs)

Dear Sir/Madam,


As you are aware, in order to have all current instructions on a subject at one place, the Reserve Bank of India had issued a Master Circular DBOD.DIR(HSG.)No.7/08.12.01/2010-11 dated July 1, 2010 on the captioned subject, which is now updated up to 30th June 2011. It may be noted that the Master Circular consolidates and updates all the instructions contained in the circulars listed in the Appendix, in so far they relate to providing bank finance to the housing sector. This Master Circular also incorporates instructions contained in certain clarifications issued by RBI to banks during the course of the year. A copy of the revised Master Circular is enclosed.

Yours faithfully,

(P.R.Ravi Mohan)
Chief General Manager

Encls: As above



Sr. No. Particulars
A Purpose
B Classification
C Previous instructions consolidated
D Scope of Application
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

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.


  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. Banks’ Exposure to Real Estate Sector
  11. Risk Weight on Housing Finance

12.Delhi High Court Order on Unauthorized Construction

13.Terms and conditions for Banks Investments in Mortgage Backed Securities (MBS)

14.Annex : Financial assistance granted by scheduled commercial banks under the category ‘Housing Finance’ as on Sept. 30 /Mar.31

15. Appendix: Housing Finance circulars


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 forconstruction/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.


2.1   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
  6. 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.
  7. 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 pari passu or second mortgage charge over the property mortgaged in favour of other lenders and/or against such other security, as they may deem appropriate.


3.1 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

  1.        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.
  2.      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).
  3.   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. 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. 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

  1.        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.
  2.      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.
  3.   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   Incorporating 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:

  1.        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.
  2.      ii.            the builder / developer / company would append the information relating to mortgage while publishing advertisement of a particular scheme in newspapers / magazines etc.
  3.   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.


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


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


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. Finance provided to–
    1.                              a.            the bodies constituted for undertaking repairs to houses, and
    2.                             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. 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.


7.1   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.


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.


9.1   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’.


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.


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.


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

  1.        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.


  1.     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.


  1.  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

  1.        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.


  1.      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.


14.1   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. 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. shall not name the SPV in such manner as to imply any connection with the bank.
  3. 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. shall not directly or indirectly control the SPV, or
  5. 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.

(i) 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.

(ii) 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.

(iii) 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.

(iv) 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.

(v) 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 Special Purpose Vehicle (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.