Banks, Loans, Kickbacks & the Myth about Clean Property Papers - Indian Real Estate Forum

RAVIKANTH · 30-01-12

Any bank for that matter, the story could all be the same.

99% of all big companies these days, hire only through Recruitment Agencies. Because the HR Manager gets 50% of the first month salary as a kickback from that Recruitment Agency. Because the Agency promises that kickback, he gives all recruitment contracts to that Agency. His bank balance bloats, without doing any job. All work is done by the Agency, he even gets a kickback for not doing anything, gets paid for not doing anything and then only signs your Appointment Letter or Contract of Hiring. After 6-9 months, u are fired, the process and kickback starts all over again with a new recruit and a new kickback. Thus, the Agency and the HR Manager, both enrich themselves at your cost and at the cost of your career, by playing with your life.

Banks follow the same principle.

Though they dont fire u after giving u a loan, the Loan Manager and the Legal Expert in the Bank or the Lawyer hired by them etc etc. all get a kickback in the form of Rs.100 per sq.ft. distributed among all and sundry in the bank. Even if the Lawyer gets only 20 rupees per sq.ft., it works out to a huge Cash Mountain by the time "Fully Sold Out" board is hung.

Assuming 1500 sq.ft. is the average BUA of each flat in Project A, assuming 100 flats are sold through Loans - see the Maths below:

1500 x 20 x 100 = 30 lacs kickback per person in the bank.

If there are 5 people involved in the bank in the loan processing department and the approvals department, Rs.100 per sq.ft. kickback gets divided among these 5 people.

Each of them makes 30 lac as the kickback.

Now, multiply the above with 30,000 apartments that get sold in an year on an average, in the whole country - through banking loans.

Private to Public - all banks have the same story, logic and principle. It is not for nothing that Loans business is such a Roaring Business in the Housing Industry. It is due to this reason that there is such cut throat competition between banks to attract each one of u. Plus they also get Performance Bonus, Incentives, 5 star hotel parties, entertainment, drinks, booze thrown by the Bank and also the Builder Lobby.

If u watch programs like "Sach Ka Samna" on TV, u will get to know things of this kind and the dirty murky underworld existing under the Human Resources Department, the Banking World, the Corporate World, the Lawyer's Paradise, the Jeweller's Heaven, the Chartered Accountant's Utopia etc. etc.

Banks exist in this world to give u a loan after accepting cheap deposits from others. That is their business. To give u a loan. And then suck your blood through High Interests.

If you buy a brand new car with a car loan, the banker does not check if the car has brakes or not. While driving out of the car showroom, if u should die in a car crash because the brakes failed, your wife can not say she will not repay the loan because the bank did not check the brakes.

10 days after you buy the flat, occupy the flat through a Housing Loan, should the building or Apartment crash due to poor construction quality or if BDA, BBMP demolish it saying it was "illegal, unauthorised, encroached land" etc. etc., u can not say you will not repay the loan because the bank did not check properly if it was "Legal, Authorised, Good Construction Quality, Without Encumberances, Not On Encroached Land" etc. etc.

Even if BDA, BBMP demolish your apartment building complex, u still have to repay the loan till the last penny.

Read the fine print. U will find 2 simple sentences which will tell u how the banks safeguard their money and their interests, which will give u an idea about how they will do the proverbial Houdini Act (escape act), how they can drag u to court, make u pay through the court order, attach your other properties or assets to recover the loan dues, leave u high and dry on the streets without a penny, without a roof over your head, even if your building is demolished or even if it crashes due to poor construction quality, whatever.

Myth. It is a Myth that everything is OK if the bank approves a loan and if u buy after a bank's legal opinion gives u the "All Clear" signal.

Just like how Mutual Funds say "Investments are subject to Market Risk", all loan products like sites, villas, apartments, flats, cars, whatever - are all also "subject to XXXXXXXX Risk". You can fill up the XXXXXX with whatever u want.

Hope the above will help Smart people on the Forum here to become SMARTER and stop hiding their Heads under the Sand like an Ostrich does its Head when threatened by a Predator.

(The above was NOT copied or pasted from any other source but is the result of Investigative Research Work that I do as a Professional Investor & Real Estate Researcher)

nkg_8 · 30-01-12

This is very much true for Bangalore. That's the reason there are maximum number of Bank auctions reported as per ForeclosureIndia.com | Bank Auction Properties | Preforeclosures | Bank Foreclosures

People do faith in the project if it is approved by public sector bank (specially IT people), and developers know how to fool them.

psangani · 30-01-12

Eye opener article..thx Ravi for sharing such useful thing..!!!

Most of the banks don't check it rather they outsource to other agencies to do the same except HDFC I guess...!! I really don't know about the HDFC but they claim that they don't give to other third party but themselves only do research for the project.

nivasi82 · 30-01-12

Hi Ravikanth,

Another useful post. Point taken that there are risks involved in real estate investments, and need to be careful.

1. I believe projects approved by nationalized entities are less likely to be fake in comparison to private banks as they do more thorough checks on property documents. Currently SBI seems to have a very good reputation in this aspect.

2. Get legal opinion from 2 or more lawyers. Clarify all the doubts on property papers with builder and see the response. If they provide all the required docs and explanations to the satisfaction of lawyers, one can go ahead.

3. Check previous projects executed by builder for any complaints. Builder doesn't turn a new leaf, and become good all of a sudden. Good builders consistently give good projects.

4. Now-a-days, people share in forums like this if they had burnt their fingers somewhere.. always research in the net for such cases.

Even after all this, one has to be prepared to face any issues in future. We have to be double sure and have backup plans if anything goes wrong.

Bye
Nivasi

gharondabhai · 04-02-12

Great sharing Ravi, appreciate that. Hope you don't mind me sharing this in Noida section.

RAVIKANTH · 04-02-12

Quote:

Originally Posted by gharondabhai

Great sharing Ravi, appreciate that. Hope you don't mind me sharing this in Noida section.

Knowledge is Power. And it should be shared to make everyone Powerful. To enlighten everybody. You are most welcome to share it in other sections, anywhere. Thx Gharonda, for finding it useful.

Nagar123 · 06-02-12

Hello,

How about canfin homes?

Jhashank RCA · 11-02-12

Hi Mr.Ravikanth,

Wonderful article and very well constructed with logic and sequence. I usually dont appreciate such negative posts because most of them are just emotional outbursts from people who have been unlucky to have bad exepriences. But in this case, you have shown clear logic on how the whole system works against long term health of us retail investors.

But on the same note, I dont think its the case with all banks in the country. Infact, coming from the financial services indsutry, I feel nationalized banks are more prone to such loose ends than private banks. And here are certain facts to prove it :-

i) Private banks are highly profit oriented and are very careful about where their investors/depositors money goes. They would never want to accumulate bad loans just to make some money and push their products.
Private banks nowadays have in house legal teams (full time employees) who do all the technical and legal valuation themselves and very less work is outsourced, thus lowering chances of misuse.

ii) Nationalized banks on the other hand - have very poor auditing systems and unusually high number of loopholes which can be exploited to a great extent. I have personally seen a few friends of mine who purchased unauthorized properties from small time builders and then went ahead and got a loan from SBI and LIC in no time! These banks outsource legal and technical work to outsiders (who can be very easily manipulated with a few 1000 rupees). On top of it all, since these banks have such massive reserves, they are hardly affected by bad loans and hence can take a lot higher risk than private banks. And all of this coupled with the fact that these banks have very powerful labor/employee unions where even smallest allegation against any employee is met with major hitback from unions, the bank management cannot penalize or punish such officers who issue loans to such unauthorized properties etc.

I can go on and on and give you some more reasons, but on the overall, although i agree with you that what you described is an unfortunate practise that does exist, in the long run and over a period of time, it will all gradually disappear and it will work out for the investor.

Home loans are vital necessity both for end users and for investors who are in the game to create wealth for themselves. As long as you go to the right builder, and if you find the right real estate advisor/consultant who is unbiased and has a good track record, I think you can be rest assured of a safe investment. After all, almost all projects (and even ones from top builders in the market) have atleast 10 to 20% deviations from legal sanctions and that is an accepted norm.

In the end, without loans, 98% of population would never be able to afford a home!

Cheers.

AashishK · 09-03-12

Quote:

Originally Posted by Jhashank RCA

Hi Mr.Ravikanth,

Wonderful article and very well constructed with logic and sequence. I usually dont appreciate such negative posts because most of them are just emotional outbursts from people who have been unlucky to have bad exepriences. But in this case, you have shown clear logic on how the whole system works against long term health of us retail investors.

But on the same note, I dont think its the case with all banks in the country. Infact, coming from the financial services indsutry, I feel nationalized banks are more prone to such loose ends than private banks. And here are certain facts to prove it :-

i) Private banks are highly profit oriented and are very careful about where their investors/depositors money goes. They would never want to accumulate bad loans just to make some money and push their products.
Private banks nowadays have in house legal teams (full time employees) who do all the technical and legal valuation themselves and very less work is outsourced, thus lowering chances of misuse.

ii) Nationalized banks on the other hand - have very poor auditing systems and unusually high number of loopholes which can be exploited to a great extent. I have personally seen a few friends of mine who purchased unauthorized properties from small time builders and then went ahead and got a loan from SBI and LIC in no time! These banks outsource legal and technical work to outsiders (who can be very easily manipulated with a few 1000 rupees). On top of it all, since these banks have such massive reserves, they are hardly affected by bad loans and hence can take a lot higher risk than private banks. And all of this coupled with the fact that these banks have very powerful labor/employee unions where even smallest allegation against any employee is met with major hitback from unions, the bank management cannot penalize or punish such officers who issue loans to such unauthorized properties etc.

I can go on and on and give you some more reasons, but on the overall, although i agree with you that what you described is an unfortunate practise that does exist, in the long run and over a period of time, it will all gradually disappear and it will work out for the investor.

Home loans are vital necessity both for end users and for investors who are in the game to create wealth for themselves. As long as you go to the right builder, and if you find the right real estate advisor/consultant who is unbiased and has a good track record, I think you can be rest assured of a safe investment. After all, almost all projects (and even ones from top builders in the market) have atleast 10 to 20% deviations from legal sanctions and that is an accepted norm.

In the end, without loans, 98% of population would never be able to afford a home!

Cheers.

Good post. Its a different matter that I don't agree with all your points. I'd like to reply to two of your points:

First:
"I have personally seen a few friends of mine who purchased unauthorized properties from small time builders and then went ahead and got a loan from SBI and LIC in no time!" - Couldn't disagree more with you on this. I'd really love to meet these smart people who got loan from SBI for unauthorized properties. Personally since I have taken a loan recently from SBI, I know how much intensive documentation and checks SBI does even if the project is on the approval list of the bank.

Second: I'd like to comment on your last line statement.
"In the end, without loans, 98% of population would never be able to afford a home!"

Without loans 98% of the people would be able to afford a home as:
1. There would be no inflation in the market and homes would be extremely affordable.

2. There would be no artificial illogical liquidity pumped by banks into the market.

bunty79 · 09-03-12

Great post Ravi.
Now I too believe that nationalized banks are a better bet in terms of legal matters. I personally know and had invested in a huge popular project (with lot of unanswered legal questions) and HDFC had an approval on the first day of launch. I tried getting a loan through LIC Housing finance and they denied. Similar is the case with SBI. The developer tried to get an approval from SBI and they kept on asking so many docs from the developer that he ultimately gave up on the trails of approval. ICICI and HDFC are the best examples of big crook banks in my view. They do everything to lure the customers to get in and once a customer, you are guaranteed a wild ride.

30-01-12	#1
RAVIKANTH Senior Member Join Date: Jul 2011 Posts: 558 My Mood: Thanks: 2 Thanked 266 Times in 149 Posts	Banks, Loans, Kickbacks & the Myth about Clean Property Papers Any bank for that matter, the story could all be the same. 99% of all big companies these days, hire only through Recruitment Agencies. Because the HR Manager gets 50% of the first month salary as a kickback from that Recruitment Agency. Because the Agency promises that kickback, he gives all recruitment contracts to that Agency. His bank balance bloats, without doing any job. All work is done by the Agency, he even gets a kickback for not doing anything, gets paid for not doing anything and then only signs your Appointment Letter or Contract of Hiring. After 6-9 months, u are fired, the process and kickback starts all over again with a new recruit and a new kickback. Thus, the Agency and the HR Manager, both enrich themselves at your cost and at the cost of your career, by playing with your life. Banks follow the same principle. Though they dont fire u after giving u a loan, the Loan Manager and the Legal Expert in the Bank or the Lawyer hired by them etc etc. all get a kickback in the form of Rs.100 per sq.ft. distributed among all and sundry in the bank. Even if the Lawyer gets only 20 rupees per sq.ft., it works out to a huge Cash Mountain by the time "Fully Sold Out" board is hung. Assuming 1500 sq.ft. is the average BUA of each flat in Project A, assuming 100 flats are sold through Loans - see the Maths below: 1500 x 20 x 100 = 30 lacs kickback per person in the bank. If there are 5 people involved in the bank in the loan processing department and the approvals department, Rs.100 per sq.ft. kickback gets divided among these 5 people. Each of them makes 30 lac as the kickback. Now, multiply the above with 30,000 apartments that get sold in an year on an average, in the whole country - through banking loans. Private to Public - all banks have the same story, logic and principle. It is not for nothing that Loans business is such a Roaring Business in the Housing Industry. It is due to this reason that there is such cut throat competition between banks to attract each one of u. Plus they also get Performance Bonus, Incentives, 5 star hotel parties, entertainment, drinks, booze thrown by the Bank and also the Builder Lobby. If u watch programs like "Sach Ka Samna" on TV, u will get to know things of this kind and the dirty murky underworld existing under the Human Resources Department, the Banking World, the Corporate World, the Lawyer's Paradise, the Jeweller's Heaven, the Chartered Accountant's Utopia etc. etc. Banks exist in this world to give u a loan after accepting cheap deposits from others. That is their business. To give u a loan. And then suck your blood through High Interests. If you buy a brand new car with a car loan, the banker does not check if the car has brakes or not. While driving out of the car showroom, if u should die in a car crash because the brakes failed, your wife can not say she will not repay the loan because the bank did not check the brakes. 10 days after you buy the flat, occupy the flat through a Housing Loan, should the building or Apartment crash due to poor construction quality or if BDA, BBMP demolish it saying it was "illegal, unauthorised, encroached land" etc. etc., u can not say you will not repay the loan because the bank did not check properly if it was "Legal, Authorised, Good Construction Quality, Without Encumberances, Not On Encroached Land" etc. etc. Even if BDA, BBMP demolish your apartment building complex, u still have to repay the loan till the last penny. Read the fine print. U will find 2 simple sentences which will tell u how the banks safeguard their money and their interests, which will give u an idea about how they will do the proverbial Houdini Act (escape act), how they can drag u to court, make u pay through the court order, attach your other properties or assets to recover the loan dues, leave u high and dry on the streets without a penny, without a roof over your head, even if your building is demolished or even if it crashes due to poor construction quality, whatever. Myth. It is a Myth that everything is OK if the bank approves a loan and if u buy after a bank's legal opinion gives u the "All Clear" signal. Just like how Mutual Funds say "Investments are subject to Market Risk", all loan products like sites, villas, apartments, flats, cars, whatever - are all also "subject to XXXXXXXX Risk". You can fill up the XXXXXX with whatever u want. Hope the above will help Smart people on the Forum here to become SMARTER and stop hiding their Heads under the Sand like an Ostrich does its Head when threatened by a Predator. (The above was NOT copied or pasted from any other source but is the result of Investigative Research Work that I do as a Professional Investor & Real Estate Researcher)

30-01-12	#4
nivasi82 New Member Join Date: Oct 2011 Posts: 23 My Mood: Thanks: 3 Thanked 4 Times in 3 Posts	Risk factor in Realty investments Hi Ravikanth, Another useful post. Point taken that there are risks involved in real estate investments, and need to be careful. 1. I believe projects approved by nationalized entities are less likely to be fake in comparison to private banks as they do more thorough checks on property documents. Currently SBI seems to have a very good reputation in this aspect. 2. Get legal opinion from 2 or more lawyers. Clarify all the doubts on property papers with builder and see the response. If they provide all the required docs and explanations to the satisfaction of lawyers, one can go ahead. 3. Check previous projects executed by builder for any complaints. Builder doesn't turn a new leaf, and become good all of a sudden. Good builders consistently give good projects. 4. Now-a-days, people share in forums like this if they had burnt their fingers somewhere.. always research in the net for such cases. Even after all this, one has to be prepared to face any issues in future. We have to be double sure and have backup plans if anything goes wrong. Bye Nivasi Last edited by nivasi82; 30-01-12 at 11:36 PM.

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30-01-12	#2
nkg_8 Senior Member Join Date: Dec 2009 Posts: 661 My Mood: Thanks: 12 Thanked 24 Times in 18 Posts	This is very much true for Bangalore. That's the reason there are maximum number of Bank auctions reported as per ForeclosureIndia.com \| Bank Auction Properties \| Preforeclosures \| Bank Foreclosures People do faith in the project if it is approved by public sector bank (specially IT people), and developers know how to fool them.

30-01-12	#3
psangani New Member Join Date: Apr 2011 Posts: 40 My Mood: Thanks: 6 Thanked 3 Times in 3 Posts	Eye opener article..thx Ravi for sharing such useful thing..!!! Most of the banks don't check it rather they outsource to other agencies to do the same except HDFC I guess...!! I really don't know about the HDFC but they claim that they don't give to other third party but themselves only do research for the project.

04-02-12	#5
gharondabhai Veteran Member Join Date: Nov 2010 Posts: 2,270 My Mood: Thanks: 72 Thanked 274 Times in 173 Posts	Great sharing Ravi, appreciate that. Hope you don't mind me sharing this in Noida section.

06-02-12	#7
Nagar123 New Member Join Date: Jul 2011 Posts: 31 My Mood: Thanks: 1 Thanked 0 Times in 0 Posts	Hello, How about canfin homes?

11-02-12	#8
Jhashank RCA New Member Join Date: Feb 2012 Location: Bangalore (India) Posts: 31 Thanks: 1 Thanked 7 Times in 6 Posts	Hi Mr.Ravikanth, Wonderful article and very well constructed with logic and sequence. I usually dont appreciate such negative posts because most of them are just emotional outbursts from people who have been unlucky to have bad exepriences. But in this case, you have shown clear logic on how the whole system works against long term health of us retail investors. But on the same note, I dont think its the case with all banks in the country. Infact, coming from the financial services indsutry, I feel nationalized banks are more prone to such loose ends than private banks. And here are certain facts to prove it :- i) Private banks are highly profit oriented and are very careful about where their investors/depositors money goes. They would never want to accumulate bad loans just to make some money and push their products. Private banks nowadays have in house legal teams (full time employees) who do all the technical and legal valuation themselves and very less work is outsourced, thus lowering chances of misuse. ii) Nationalized banks on the other hand - have very poor auditing systems and unusually high number of loopholes which can be exploited to a great extent. I have personally seen a few friends of mine who purchased unauthorized properties from small time builders and then went ahead and got a loan from SBI and LIC in no time! These banks outsource legal and technical work to outsiders (who can be very easily manipulated with a few 1000 rupees). On top of it all, since these banks have such massive reserves, they are hardly affected by bad loans and hence can take a lot higher risk than private banks. And all of this coupled with the fact that these banks have very powerful labor/employee unions where even smallest allegation against any employee is met with major hitback from unions, the bank management cannot penalize or punish such officers who issue loans to such unauthorized properties etc. I can go on and on and give you some more reasons, but on the overall, although i agree with you that what you described is an unfortunate practise that does exist, in the long run and over a period of time, it will all gradually disappear and it will work out for the investor. Home loans are vital necessity both for end users and for investors who are in the game to create wealth for themselves. As long as you go to the right builder, and if you find the right real estate advisor/consultant who is unbiased and has a good track record, I think you can be rest assured of a safe investment. After all, almost all projects (and even ones from top builders in the market) have atleast 10 to 20% deviations from legal sanctions and that is an accepted norm. In the end, without loans, 98% of population would never be able to afford a home! Cheers.

09-03-12	#10
bunty79 New Member Join Date: Aug 2009 Posts: 31 My Mood: Thanks: 5 Thanked 1 Time in 1 Post	Great post Ravi. Now I too believe that nationalized banks are a better bet in terms of legal matters. I personally know and had invested in a huge popular project (with lot of unanswered legal questions) and HDFC had an approval on the first day of launch. I tried getting a loan through LIC Housing finance and they denied. Similar is the case with SBI. The developer tried to get an approval from SBI and they kept on asking so many docs from the developer that he ultimately gave up on the trails of approval. ICICI and HDFC are the best examples of big crook banks in my view. They do everything to lure the customers to get in and once a customer, you are guaranteed a wild ride.