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SBI Home Loans

07 Feb 2020

In case it is delayed then the buyer exercises the guarantee option but he has to renounce the right to the house. To take the advantage of interest and down payment there should be no project delay, and if the project gets delayed then agreement will not be under the borrower of the bank liability and he will also lose the down payment and the interest which was paid yet.

Properties which are not in ready to move possession/under construction properties are usually most popular among buyers, and the main reason is under construction properties are available at low rates as compared to ready to move in possession. However, because of too many delays and defaults in under construction properties, Users confidence has decreased. SBI has a new product of home loan, Residential Builder Finance with Buyer Guarantee scheme, which has targeted to repay the principal borrowed if there is any default. 

According to research like other financial products, it has conditions that should be considered, teams manual reviews. Recently, minimum home loans which finance companies have paid out are either for ready possession or resale properties. End users' confidence is built by money lenders to go for under-construction properties by giving offers of new products. But it is important for property buyers to check and understand its limitations and conditions.

The new launched product of SBI tells about safeguards and assures project completion the guarantee it offers on the principal amount. Bank has its own demand, like if builders have a record of completing projects on time to time and with good finance then only it works with them. SBI official said, “We will choose the developer to whom we want to work with after analysing it based on different parameters”, had said this on the basis of not revealing it because of no authorization to talk on media.

The projects will be restricted by banks with a cost of Rs400 crore in the budget segment, which will be noticing maximum sales currently.

SBI will be itself the only sole lender for the chosen project for loan. The bank demand is it not to allow any builder to take any kind of loan for project or even to keep any outstanding bills with sundry creditors like suppliers of cement, steel, etc for some days. Just to take the project on track, SBI allows to have complete control on the cash flows of the project. According to officials, “This will ensure that no one should initiate Insolvency and Bankruptcy Code (IBC) that is proceeding against the builder at the National Company Law Tribunal (NCLT).

How the guarantee works

The guarantee will be offered by the builder; SBI will fulfil as a bank to the builder. If any end user is searching for any under construction flat, the builder will ask if the user needs some guarantee from for project completion. (real-estate website and android app, where end users can search for property and submit their own offer price against the builders quote) try to list maximum legal points for the real-estate sector.

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In case of any delay, the end user is willing so the developer will give a guarantee to pay the principal amount, provided the end user compulsory to take home loan from SBI. Even so, builders will pay the bank for guarantee and not the property buyer. In case there is any delay, the property buyer exercises the guarantee option, and he has to hand over the house. The guarantee will simply free the user of the liability that he has towards SBI as a borrower. The interest amount paid will remain with the bank, and the down payment with the builder.

Mint take

If there is any delay so it would be better to request the Real Estate (Regulation and Development) Act or Rera instead of the guarantee. At Rera, the property buyer can demand for the cash back that is down payment and loan principal, paid to the developer along with the charged interest that the real estate regulator will award.

Most beneficial way for property buyers is under IBC if 10% of the users or 100 of them, whichever is less, agree to file a case against the developer. “Property Buyers can also look for other reliefs available. SBI’s responsibility is restricted to the principal as accordance with the contract. Legal action takes a long time. Claiming the guarantee would be faster. According to the official, if the safeguards are in place, there won’t be any project delay. Even the bank or the builder will not force the property buyer to take this product.

The guarantee should not force the user to purchase any property according to his demand. On the other hand, projects which are getting delayed will be decreased as per SBI will work carefully before presenting this kind of product.