Saturday, September 19, 2009

Realtors must tell buyers about banks' claim on property: RBI

MUMBAI: Prospective home buyers will now know if the land on which their building stands is free of outside claims after a recent Reserve Bank of Greatest ceilings

India (RBI) circular mandating builders mortgaging the land to raise money to disclose it in all advertisements and brochures.

RBI has asked lenders to ensure that all publicity material relating to the sale of real estate make a mention of the bank’s lien on the property so that home buyers are not kept in the dark about this legal claim or ‘hold’.

RBI aims to prevent prospective buyers from being lulled into the belief that the flats they own are on ‘free-hold’ land through this move.

Says Anuj Puri, country head of real estate consultant Jones Lang LaSalle Meghraj, “The RBI circular will bring transparency and accountability on the part of developers. It would also give a chance to buyers to see the viability of projects especially when the loan amount is very high.”

In cities such as Mumbai, a flatowner gets rights over his house through membership of a cooperative housing society, which owns the building. The land is not owned by the society unless it is transferred through a conveyance.

According to senior advocate R N Shetty, who specialises in real estate matters, property where a bank has a charge does not have a clear title and therefore cannot be transferred to the society through a conveyance. He added that the bank could also attach and auction the property in the event of a default by the builder.

RBI has said banks should as a pre-condition to lending insist that builders disclose complete details of the charge on the property. This should include the name of the bank that has a lien on the property which a builder is seeking to develop and for which it has sought a loan from the lender.

The builder or developer will have to add as an appendix information relating to the mortgage while advertising a particular scheme. Besides this, it will have to provide a No Objection Certificate of the mortgagee bank for sale of flats/property, if required.

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