Some banks have introduced innovative Housing Loan Schemes in association with developers/builders. The normal process of these schemes, is upfront disbursal of sanctioned individual housing loans to the builders without linking the disbursals to various stages of construction of the housing project, Interest/EMI on the housing loan availed of by the individual borrower being serviced by the builders during the construction period/ specified period, etc. The above type of loan products is popularly known as 80:20, 75:25 schemes, etc.
Risks to the banks and borrowers:
There may be certain additional risks involved on such housing loans dispersed by the banks when there are disputes between individual borrowers and developers/builders, or default/ delayed payment of interest/ EMI by the developer/ builder during the agreed period on behalf of the borrower, or non-completion of the project on time, etc. Besides, any delayed payments by developers/ builders on behalf of individual borrowers to banks may lead to lower credit rating/ scoring of such borrowers by credit information companies (CICs) as information about delayed servicing of loans gets passed on to the CICs on a regular basis.
In certain cases, where bank loans are also disbursed upfront on behalf of their individual borrowers in a lump-sum to builders/ developers without any linkage to stages of construction, banks run disproportionately higher exposures with concomitant (attendant) risks of diversion of funds.
RBI guidance on housing finance:
In view of the above RBI has instructed all the banks that the disbursal of housing loans sanctioned to individuals should be closely linked to the stages of construction of the housing project/houses and upfront disbursal should not be made in cases of incomplete / under-construction / green field housing projects. However, if such projects are sponsored by the Government/Statutory Authorities, banks may disburse the loans as per the payment stages prescribed by such authorities, even where payments sought from house buyers are not linked to the stages of construction, provided such authorities have no past history of non-completion of projects.
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