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Can NOC from bank safeguard the buyer incase builder does not clear the mortgage

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Can NOC from bank safeguard the buyer incase builder does not clear the mortgage

Last updated: June 2 2019
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  • Can NOC from bank safeguard the buyer incase builder does not clear the mortgage

    Hi All,

    I have finalized an apartment and after paying 10% money, when I had applied for EC, I figured out that there is an existing mortgage on many units in the apartment project that the builder/developer has entered into. Based on my request the builder has obtained a NOC from the lending bank and provided a scanned copy of the same to me. The NOC, addressed to the builder, states that the lender does not have any claims on the specific unit that I intend to purchase as long as the remaining sale proceeds are deposited into a specific account number.

    However the builder says that though I issue the cheque to the same account number for the remaining 90% of the sale consideration there will NOT be any rectification/relinquishment deed which will remove this specific unit from the mortgage and it will happen only after the total mortgage that they have taken (running into multiple hundred crores) has been closed satisfactorily.

    Considering that I have the NOC from the lending bank, what are the risks involved in this deal?

    What if the builder goes bankrupt and does not service the mortgage?

    If I need to resell this flat, will prospective buyers be willing to buy it with the NOC from bank that I have today?

    Thanks for reading and Thanks in advance for your expert opinions.




    Last edited May 28 2019, 09:49 PM.
  • #2

    #2

    Re : Can NOC from bank safeguard the buyer incase builder does not clear the mortgage

    Avoid such properties. If the Bank has to give NOC, then it means there is a double mortgage on the property. One is the land and the upcoming building structure is mortgaged to one bank/NBFC. Then each apartment is mortgaged to different banks by the purchasers buying the property. Very rarely do these kind of projects complete, because the Builder has already taken out most of the money from the property and there is nothing he will accomplish by spending money and completing the project. So these kind of projects should be avoided. And NOC from the mortgagor bank is ok but its a trap to extract money from the other bank giving a fresh loan.



    And in terms of resale, you will not find anyone unless the pricing is distress, which means you will have to exit at a loss. Nobody wants to put money in a headache project. Of course later heart burns may happen if the project is completed but who wants to take a risk in this market. Better to stay away and get your refund from the builder.

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