Should lenders ask for com­ple­tion cer­tifi­cates?

Check­ing the sale-deed of an apart­ment is not enough for dis­burs­ing home loans

HT Estates - - HTESTATES - Jee­van Prakash Sharma

Fi­nan­cial in­sti­tu­tions, be­fore dis­burs­ing loans, rou­tinely check the saledeed of an apart­ment in­stead of com­ple­tion cer­tifi­cates of the project. A com­ple­tion cer­tifi­cate would make due-dili­gence eas­ier.

“In many real es­tate des­ti­na­tions in Delhi a nd NCR, the com­ple­tion cer­tifi­cate of a group hous­ing project is not a manda­tory doc­u­ment for the reg­is­tra­tion of the flats. How­ever, a com­ple­tion cer­tifi­cate is the only doc­u­ment which con­firms that an apart­ment has been built in com­pli­ance with the build­ing bye- laws. Thus, many il­le­gal flats which are reg­is­tered in the rev­enue records are il­le­gal. Un­for­tu­nately, fi­nan­cial in­sti­tu­tions are more con­cerned with the sta­tus of the rev­enue records of an apart­ment in­stead of the com­ple­tion cer­tifi­cate,” says Alok Ku­mar, pres­i­dent, Fed­er­a­tion of Apart Own­ers’ As­so­ci­a­tion of Ghazi­abad.

A se­nior of­fi­cer from the East Delhi Mu­nic­i­pal Cor­po­ra­tion has a sim­i­lar com­plaint against the fi­nanc­ing com­pa­nies. “When a de­vel­oper gets ap­proval for the blue­print of a build­ing any­where in Delhi, it’s manda­tory for him to get a com­ple­tion cer­tifi­cate as it con­firms that the con­struc­tion has been car­ried out ac­cord­ing to the ap­proved plan. How­ever, the de­vel­oper sells the dwelling units with­out tak­ing the cer­tifi­cate and sub-reg­is­trars in Delhi reg­is­ter such prop­er­ties in the rev­enue records be­cause com­ple­tion cer­tifi­cate is not manda­tory for reg­is­tra­tion of prop­er­ties in Delhi. By the time we fig­ure out what’s hap­pen­ing to the unau­tho­rised con­struc­tion and pub­lish the de­tails on our web­site, the de­vel­oper sells his flat and the banks ap­prove a loan in favour of the home­buyer. Ide­ally, banks should get a no-ob­jec­tion cer­tifi­cate from the mu­nic­i­pal cor­po­ra­tion,” he sug­gests.

In­ter­est­ingly, enough the le­gal of­fi­cers of many banks agree that they don’t con­sider the com­ple­tion cer­tifi­cate to be a sig­nif­i­cant doc­u­ment. “How many projects have got com­ple­tion cer­tifi­cates in Indirapuram? Not even 20%. Not only that, 90% dwelling units in Delhi don’t have the cer­tifi­cates. If we start ap­prov­ing loans on the ba­sis of the said cer­tifi­cate, it will hit the hous­ing fi­nance busi­ness badly. We have ob­served that il­le­gal flats are reg­u­larised by the de­vel­op­ment au­thor­i­ties af­ter charg­ing a penalty from the de­vel­op­ers or the home­buy­ers,” says a le­gal of­fi­cer from a re­puted bank on con­di­tion of anonymity.

In fact, the RBI guide­lines to banks and fi­nan­cial in­sti­tu­tions re­gard­ing fi­nanc­ing built up prop­erty say, “In cases where the ap­pli­cant ap­proaches the bank/FIs for a credit fa­cil­ity to pur­chase the built up house/flat, it should be manda­tory for him to de­clare by way of an af­fi­davit-cum-un­der­tak­ing that the built up prop­erty has been con­structed as per the sanc­tioned plan and/or build­ing bye-laws and as far as pos­si­ble has a com­ple­tion cer­tifi­cate also.

Mean­while, home­buy­ers stuck with bad deals com­plain that the fi­nan­cial in­sti­tu­tions are “play­ing with pub­lic money. They vi­o­late RBI guide­lines on hous­ing fi­nances and ap­prove loans to home­buy­ers for unau­tho­rised projects. And when such projects are de­mol­ished, they ha­rass home­buy­ers with all pos­si­ble means to re­cover the loan amount. We are not in a po­si­tion to im­pli­cate the er­rant bank of­fi­cials. Even the RBI turns a blind eye to such com­plaints,” says a buyer, who has been fight­ing a case against a re­puted bank for last three years. In his case, the bank ap­proved a loan for an apart­ment which was unau­tho­rised and later de­mol­ished by the mu­nic­i­pal au­thor­ity in Delhi.

PIC­TURE FOR REP­RE­SEN­TA­TIONAL PUR­POSE ONLY

Fi­nan­cial in­sti­tu­tions vi­o­late RBI guide­lines on hous­ing fi­nances and ap­prove loans to home­buy­ers for unau­tho­rised projects

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