The division bench of the Delhi High Court comprising Chief Justice Satish Chandra Sharma and Justice Subramonium Prasad recently observed that banks cannot be converted into builders or authorities to ensure that a real estate project is completed. The Court was hearing a plea based seeks directions from the Centre Government to draft and implement a comprehensive scheme to address the grievances of home buyers availing home loans, including those who don’t have possession of their flats but are still paying monthly EMI instalments, and are unable to claim tax benefits on the payment of such monthly interest amounts.
The complainant’s letter alleged that the banks, government and builders operate as part of a nexus and operate against the public interest. The complainant prayed that banks should be held responsible for the inordinate delay in real estate projects, inasmuch as banks only sanction loans for projects that are verified as genuine, after proper scrutiny.
In the previous hearing, Court observed that when a project remains incomplete, it is always open for the banks to approach the National Company Law Tribunal under the Insolvency and Bankruptcy Code, 2016 to get an insolvency and resolution professional (IRP) appointed and to take measures to ensure that project is revived and the project is completed because the banks are also anxious to recover their money.
“The entire problem that has been projected by the Complainant has to be looked into to safeguard the interests of the home buyers and also the banks who deal with public money, and the banks cannot be converted into developers and builders or an authority on whom the responsibility is loaded to ensure that the project is completed. Other than the remedies in the Insolvency and Bankruptcy Code, 2016, it is always open for the home buyers to approach the Real Estate Regulatory Authority (RERA) to ensure that the project is completed”, the high court, said disposing of the plea.
“The master circular also advises that the quantum of loans which are to be granted by the banks for housing finance and also to maintain a loan to value ratio in case of individual housing loans,” the court said.
The Court further observed that RBI can only guide the banks to frame their loan policies with the approval of their boards and banks are expected to conduct basic due diligence at the time of approval/sanction/disbursement/renewal of the loans.
“The guidelines specify that the housing loans sanctioned to individuals who invest in housing projects are linked to the stages of construction of housing projects. However, it cannot be said that it is the banks’ responsibility to get the project completed and the bank cannot assume the role of the builder to complete the project,” the high court said.
It was further observed that banks can only flag a borrower for misutilisation of loans and it is for the lenders to take appropriate legal action by approaching the civil forum to ensure that the project is completed within time.
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