Banks not so willing to give property loans

Banks not so willing to give property loans
BDA Cautions On Illegal Layouts Stamps Dept Too Tightens Norms
The Times of India

Bangalore: The BDA, banks and stamps and registration department have stepped in to curb increasing speculation in the property market and the resultant mushrooming of illegal layouts.

The BDA has identified 108 illegal layouts, predominantly coming under the city municipal councils and town municipal councils.


Former BDA commissioner M N Vidyashankar had written Demi-Official (DO) letters to major banks cautioning them against sanctioning property loans in unapproved layouts and also to co-op housing societies.
The letters, accompanied by a list of illegal layouts and documents required for sanctions, stated: “If banks sanction loans in these layouts, it’s at their own risk.’’

There has been a slowdown on the registration of properties in municipal areas which is the result of a similar communication from Vidyashankar to stamps and registration department.

Banks have tightened lending norms and are focusing on documentation. Banks said approved building plan is a must now and property documents are being scrutinised more vigorously. “Cases of more than one borrower pledging the same property are coming up. It has put pressure on banks,” said Corporation Bank officers.

An Indian Bank official said his bank has begun to discount the rental income from a property while sanctioning a loan. “Earlier, besides salary, we were taking into account the rent likely to be generated from property as many borrowers were investors. With properties coming up in hundreds, we are discounting the rentals by 50%,” he said.

Bankers believe the government must provide a mechanism so banks can directly contact sub-registrar office for verifying properties.

Also, a norm which was given a go-by is being put into action. A mandatory clearance from the Union ministry of environment for projects worth more than Rs 50 crore or have more than 5,000 occupancies or discharge more than 50,000 litres of sewage is needed for layout approval.

Sources said the runaway increase in property prices has also put builders on guard and many have turned cautious when it comes to bulk booking. “Builders are uncomfortable with bulk booking because when there is a correction in the market, it affects them hard,” said a source in HDFC.

BANKS TIGHTEN SCREWS
No loan without these papers
Approved layout plan.
Commencement certificate for buildings from the local planning authority/allotment letter from housing society for site purchase.
Khata and tax-paid receipt.
Proof of advance payment made.
Papers of title to the property of previous and present owners.
Encumbrance certificate of 15 yrs.
PAN Card.
No-objection certificate from employer.
Income tax returns for the past three years.

BDA: IT’S ILLEGAL WITHOUT THESE DOCUMENTS
DC conversion certificate.
Sanctioned layout plan with approval letter.
Relinquishment deed.
Release certificate.
Commencement certificate.
For BDA layouts — allotment letter with NOC issued for bank loan.