I have booked a 1BHK flat in a project in Noida, Sector 75, and had applied for a home loan from HDFC Ltd. At the time of applying for the loan, the salesperson told me that another project of 2BHK flats by the same builder was already approved by HDFC and the 1BHK project was also in the pipeline for approval. Therefore, I submitted all my applications for loan specifying the purchased flat details in the form. After two months my application for the loan amount has been approved, but the bank has still not approved the 1BHK project. According to the builder they have submitted all the necessary papers to the bank. The bank is not assuring me of any date till when the project will get approved nor giving me any information regarding disapproval of the project. I will have to pay the next installment for my flat soon, for which I was depending on the bank loan. It will take another two months to apply to another bank. My query is what should I do now? Should I wait or should I apply to another bank? How can I get back my processing fees from HDFC Ltd?
— Sunil Motwani You should never buy in an under-construction project unless it has been pre-approved by at least a couple of large lenders. Even then, do please remember that pre-approval does not mean that the risk of delay is not on your head.
It is always better to buy a ready-to-move-in flat even though it is more expensive because that you avoid all construction delay risks and saves on service tax and VAT that is payable only on under-construction flats.
I would advise you to approach another lender without any delay for the loan, as it is not certain within what time frame the lender will approve the project. Check with the developer in case any lender has pre-approved the project and you can approach that lender. Most lenders do not refund processing fees in case the loan sanction is not used. You can make an attempt to get the refund of processing fees but it may not really work. I am planning to buy a property, which is expected to go under redevelopment in Goregaon, Mumbai. I will be grateful if you can tell me whether the situation (with regard to home loans) still remains the same or if banks are more willing to give no-objection certificates and may not ask for additional security during the period under which the property is under reconstruction.
— Ajay Kumar It is usually difficult to get an NOC from the existing lender if the property is going in for redevelopment. There are chances that the lender may ask the borrower to repay the entire loan amount in one go before it goes for redevelopment. The lenders are reluctant to give NOC because redevelopment is a long process with frequent regulatory changes, high probability of litigation and delay in construction. This all may lead to the borrower defaulting on the loan repayment.
Hence, in such a situation the best option may be to approach the lender funding the developer of the redevelopment project for the balance transfer from your existing lender.
You can also use the corpus amount received, if any, from the redeveloper to pay-off the loan amount.