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RBI releases guidance to Banks suggests ban on 20:80 (Subvention scheme) Noida

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RBI releases guidance to Banks suggests ban on 20:80 (Subvention scheme) Noida

Last updated: September 8 2013
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  • RBI releases guidance to Banks suggests ban on 20:80 (Subvention scheme) Noida

    Hi,

    Link home loans to stages of construction: RBI to banks


    Mumbai: The Reserve Bank on Tuesday asked banks to link the disbursal of home loans to stages of construction to protect the interests of buyers and contain the fallout of "innovative" housing financing schemes.

    "In view of the higher risks associated with such lump-sum disbursal of sanctioned housing loans and customer suitability issues, banks are advised that disbursal of housing loans sanctioned to individuals should be closely linked to the stages of construction of the housing project/houses...," an RBI notification said.

    Upfront disbursal "should not be made in cases of incomplete/under-construction/green field housing projects," it said.

    The notification follows the introduction by some banks of "innovative housing loan schemes" in association with developers/builders, where upfront disbursal of housing loans is made to builders without being linked to the various stages of construction.

    Also, under such schemes, the interest/EMI on the housing loan availed of by the individual borrower is serviced by the builder during the construction period. These loan products, the RBI said, are popularly known by names such as 80:20 and 75:25 schemes.

    The RBI said such home loan products are likely to expose banks and their borrowers to additional risks.

    The risks include disputes between borrowers and builders; default and delayed payment of interest/EMI by the builder on behalf of the borrower, and non-completion of the project on time.

    PTI
  • #2

    #2

    Re : RBI releases guidance to Banks suggests ban on 20:80 (Subvention scheme) Noida

    Moderators you can make this sticky since it will have huge impact on Noida RE prices lets discuss here its impact....

    Guyz please give your views...

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    • #3

      #3

      Re : RBI releases guidance to Banks suggests ban on 20:80 (Subvention scheme) Noida

      Under-Construction projects betting heavily on home loan products, popularly known as 80:20 or 75:25 schemes, will be severely impacted. Another effort by RBI to tighten home loans norms by asking banks to link disbursal to construction. See details here -

      Banks must avoid upfront disbursal of home loans to builders: RBI | Business Standard

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      • #4

        #4

        Re : RBI releases guidance to Banks suggests ban on 20:80 (Subvention scheme) Noida

        Most of the projects offering these schemes in Noida have completed their structure so I do not see much impact.

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        • #5

          #5

          Re : RBI releases guidance to Banks suggests ban on 20:80 (Subvention scheme) Noida

          Loan on Down payment has been stopped by RBI

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          • #6

            #6

            Re : RBI releases guidance to Banks suggests ban on 20:80 (Subvention scheme) Noida

            Disbursal of housing loans sanctioned to individuals, should be closely linked to the stages of construction of the housing project/houses. Upfront disbursal "should not be made in cases of incomplete/under-construction/green field housing projects.

            RBI stops down payment scheme for home loans - Business News - Sahara Samay

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            • #7

              #7

              Re : RBI releases guidance to Banks suggests ban on 20:80 (Subvention scheme) Noida

              Originally posted by Dilli Wala View Post
              Disbursal of housing loans sanctioned to individuals, should be closely linked to the stages of construction of the housing project/houses. Upfront disbursal "should not be made in cases of incomplete/under-construction/green field housing projects.

              RBI stops down payment scheme for home loans - Business News - Sahara Samay
              This is wrong interpretation of the RBI guidelines. RBI hasn't stopped funding under down payment scheme but under subvention scheme. Recall that DLF and Unitech are running such schemes for their gurgaon projects but mind it so long as payment is correlated with construction of project, RBI hasn't given guidelines. Down payment scheme is in any case started by banks only after more than 50-70% of the project has been completed.

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              • #8

                #8

                Re : RBI releases guidance to Banks suggests ban on 20:80 (Subvention scheme) Noida

                Originally posted by rajaji View Post
                This is wrong interpretation of the RBI guidelines. RBI hasn't stopped funding under down payment scheme but under subvention scheme. Recall that DLF and Unitech are running such schemes for their gurgaon projects but mind it so long as payment is correlated with construction of project, RBI hasn't given guidelines. Down payment scheme is in any case started by banks only after more than 50-70% of the project has been completed.
                Since down payment plans are not linked with construction , therefore any plan which is not linked with construction schedule will not be loaned as per latest RBI directive and now many banks have started implementing it in view of high risk of default by the builder.

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                • #9

                  #9

                  Re : RBI releases guidance to Banks suggests ban on 20:80 (Subvention scheme) Noida

                  Good move by RBI.

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                  • #10

                    #10

                    Re : RBI releases guidance to Banks suggests ban on 20:80 (Subvention scheme) Noida

                    Originally posted by amarakbar View Post
                    Most of the projects offering these schemes in Noida have completed their structure so I do not see much impact.
                    Not true. There are lot of subvention unit available in resale for jaypee kasa/krescent home. Since after subvention plan this become down payment it is very risky to buy such unit. It's good that it is banned by RBI. As I understand RBI has banned the down payment plan also. Correct ??

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                    Closed and COPIED: https://www.indianrealestateforum.co...ojects?t=21159
                    Last edited November 29 2014, 01:45 PM.

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