Friday, December 29, 2006

Banks turn away BDA site allottees

Banks turn away BDA site allottees
New Indian Express

BANGALORE: The BDA’s decision to depart from its practice of issuing absolute sale deeds, and instead, issue lease-cum-sale agreement has made life difficult for site allottees. They are finding it impossible to get bank loans.

This is only an unpredictable twist in the BDA tale. It now turns out that all major banks have been turning away allottees in the Arkavathy layout after they have discovered that they will have to wait till the expiry of the lease period to recover the loan advanced in the event of a default.

The BDA has, so far, allotted 9000 sites in the Arkavathy layout by imposing a lease period of 10 years. The registration formalities are done only after 10 years.

This, in fact, was the practice in vogue till about six years ago. The BDA reverted to this old way of site allotments early this year after it found that issuing absolute sale deeds was not helping those who were in genuine need of a site. It, instead, suited people who quickly sold their sites upon allotment and profited from the real estate boom in Bangalore.

The trend defeated BDA’s purpose of providing housing sites to the needy. Unexpected, however, was how the banks would respond to this new approach. The long period of wait in the event of a default and the RBI’s warnings on restricting exposure to real estate seem to have acted as a dampener on banks.

While nationalised banks are clearly shying away from lending to BDA sites, private money lenders are cashing in on the distress of site allottees and are offering loans at rates upwards of 24% per annum. Badly hit by this are families from the economically weaker sections who have got 20x30 ft sites, but could not get bank loans.

Interestingly, even BDA’s sole banker, the Canara Bank, too seems to be unaware of the change in BDA’s allotment rules. Some of its branches asked the allottees to produce registration documents in support of their loan requisition, unaware that the State-owned agency has stopped registration of sites upon allotment.

If banks stick to their stand, it will only spell more trouble for the BDA site aspirants, a bulk of whom cannot buy a site without assistance from banks. The BDA has already hinted that the price of its sites will almost double in the next allotment in line with the market trends.


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