Banks Refuse to Provide Loans to Builders Not Registered under RERA

Banking News

Business Mantra News

  • Government passed Real Estate Regulation Act (RERA) in 2016, the provisions of which came into force from 01-05-2016 and certain provisions from 01-05-2017 to protect the rights of small home loan buyers and help in investment in real estate sector.
  • Every small and big builder has been asked to get itself registered under RERA, wherein certain statutory formalities are to be complied with by the builders and its promoters.
  • Each and every state has been advises to enact RERA in the interest of the home buyers of their respective state.
  • Earlier Banks were providing finance to builders, of late each and every banker has decided to grant loans to those builders, who are registered under RERA. This has been done to safeguard the rights of home buyers.
  • Moreover, to be on the safer side, banks have started asking for additional collateral in the form of personal assets of the promoters.
  • Under RERA, the builders are to maintain a separate account keeping 70% of the fund collected from the home buyers. Contrary to the earlier provision of 100% use only 30% of the fund thus collected can be utilized by the builders for purpose other than the project of the home buyers.
  • Objective of the RERA is to bring transparency like information relating to project cost, government approvals, project plans in order to safeguard the interest of the home buyers.

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