Important pre-sanction home-loan regulations lay down by RBI
Updated as per RBI master circular dated April 2, 2024
In light of the observations of the Delhi High Court on unauthorized construction, Banks/FIs before extending credit facilities shall follow the RBI guidelines stated below.
When an applicant owns a plot/land and approaches the banks/FIs for financial help to construct a house, the lender has to obtain a copy of the sanctioned plan by a competent authority in the name of a person applying for credit facility before sanctioning the home loan to the applicant.
Further, the applicant has to submit an affidavit-cum-undertaking to the bank, while applying for the credit facility, that he shall not violate the sanctioned plan, construction shall be strict as per the sanctioned plan and it shall be the sole responsibility of the executants to obtain completion certificate within 3 months of completion of construction, failing which the bank shall have the power and the authority to recall the entire loan with interest, costs, and other usual bank charges.
An Architect appointed by the bank must also certify at various stages of construction of a building that the construction of the building is strictly as per the sanctioned plan and shall also certify at a particular point of time that the completion certificate of the building issued by the competent authority has been obtained.
In such cases where the applicant desires to buy a built house or flat, it is mandatory for him to declare by way of an affidavit-cum-undertaking that the built-up property has been constructed as per the sanctioned plan and/or building bye-laws and as far as possible has a completion certificate also.
An Architect appointed by the bank must also certify before disbursement of the loan that the built property is strictly as per the sanctioned plan and/or building bye-laws.
Banks shall not extend loans in respect of those properties that fall in the category of unauthorized colonies unless and until they have been regularized and development and other charges paid.
No loan should also be given in respect of properties meant for residential use but which the applicant intends to use for commercial purposes and declares so while applying for a loan.