In view of the higher risks associated with lump-sum disbursal of sanctioned housing loans and customer suitability issues under schemes called 80:20 or 75:25, RBI has advised banks that disbursal of housing loans sanctioned to individuals should be closely linked to the stages of construction of the housing project/houses and upfront disbursal should not be made in cases of incomplete, under-construction and greenfield housing projects.

The guideline covers certain innovative housing loan schemes in association with developers and builders where upfront disbursal of sanctioned individual housing loans is given to the builders without linking the disbursals to stages of construction of housing project. In such cases interest/EMI on the housing loan availed of by the individual borrower is serviced by the builders during the construction period/specified period etc. and the arrangement could include signing of tripartite agreements between the bank, the builder and the buyer of the housing unit.

Such housing loan products are likely to expose the banks as well as home loan borrowers to additional risks, like in case of disputes between individual borrowers and developers/builders, default/delayed payment of interest/EMI by the developer/builder during the agreed period on behalf of the borrower, and non-completion of the project on time.

Further, any delayed payment by developers/builders on behalf of individual borrowers to banks may lead to lower credit rating/scoring of such borrowers by credit information companies as information about servicing of loans gets passed on to the CICs on a regular basis. In such cases, banks also run the risk of disproportionately higher exposures with concomitant risks of diversion of funds.

Housing loans to individuals have increased by 17 per cent annually to Rs.4,849 billion by June 28, 2013, speeding from 11 per cent in the corresponding period in the previous year.

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