AHMEDABAD: The Gujarat Real Estate Regulatory Authority (GujRERA) has identified significant issues in loan practices adopted by builders and non-banking finance companies (NBFCs) for project financing. These issues include the mortgaging of unsold inventories from other projects and the disbursement of loans without RERA registration.
To safeguard buyers’ interests, the authority plans to address these concerns with the state finance department for escalation to the Reserve Bank of India (RBI). GujRERA emphasizes the necessity for a standardized operating procedure for real estate projects funded by NBFCs.
Senior officials from GujRERA have noted that builders seeking funds frequently turn to NBFCs, often securing loans much larger than the collateral provided. This includes aggressively mortgaging unsold inventories from other projects, frequently without disclosing such actions to buyers.
“We’ve uncovered instances where developers secure loans for new projects by using unsold inventory from other ongoing or completed projects as collateral. This poses a risk to buyers if developers default on their loans. We have received complaints where NBFCs have claimed possession of properties due to the developer’s loan defaults, despite buyers having already paid the developer,” an official stated.
Another official remarked, “There are practices involving the disbursement of substantial loan amounts without adhering to construction milestones. Numerous cases of cross-project funding exist. Additionally, many NBFCs authorize loan disbursements without RERA registration for the project, thereby compromising buyers’ rights. The lack of a structured format for NOCs and the execution of sale agreements without them can lead to disputes regarding ownership.”
Officials mentioned that GujRERA has prepared a presentation to be submitted to the state finance department, highlighting the need for RBI’s attention. The authority will recommend that NBFCs adhere to RBI’s regulations for land financing.
