RBI Issues Circular On Levying Unfair Interest Charges On Customers

A house with his own nameplate on the entrance. This was Himesh’s dream. He had booked the house in the year 2013 and EMIs were being paid regularly. But, the dream of his dream house is still a dream. The project got stalled due to financial troubles of the builder and Himesh had to face the brunt of it.

After the intervention of RERA, work on some stalled projects has resumed again. The responsibility of building the house is now being handed over to a new builder. But new builders are asking more money to complete the houses.

Lakhs of people like Himesh will have to knock on the door of the bank to arrange this money. The new builder has asked for additional money, but before that let’s understand how to get loan for it.

Stalled projects
According to property consultant Anarock, by the end of May 2022, about 4.8 lakh houses worth about Rs 4,48 lakh crore in seven big cities of the country are stuck in different phases of construction. These houses were launched in the year 2014 or earlier.  These include Delhi-NCR, MMR, Chennai, Pune, Bengaluru, Hyderabad and Kolkata.

The National Capital Region, and the Mumbai Metropolitan Region have the highest share of 77 per cent in terms of number of stranded houses. The construction work of 2,40,610 houses in NCR and 1,28,870 in Mumbai Metropolitan Region has come to a standstill or it is going on with considerable delay.

Many things can change, when work resumes in a stalled project.
The new builder replacing the old one will make a new ‘Agreement to Sell’ in which the terms of sale, the money given to the old builder, the increased cost of the house and the amount to be paid now, will be mentioned.

The documents that are usually required for taking a home loan, will be applicable here as well. Moreover, in most  of such cases court order, National Company Law Tribunal or RERA order and papers for change of ownership will be required which are either present in the public domain or will be given to the customer by the developer.
In such cases three situations arise. First, your old loan is running and you want to increase it. In second situation your old loan is over and you need loan only for the increased amount and last porbable situation is that you are taking a home loan for the first time.
Processing fee, legal charge and documentation fee will have to be paid in all the three cases.

If the home loan for the foreclosed house is already running then the bank will be able to incorporate the increased cost into the existing loan, i.e. topup loan.
Banks will check your income, occupation, credit score and debt-to-income ratio.
These details get checked in case of new loan as well. Using this the bank will know whether you will be able to pay the increased EMI of the loan or not.
If the work to finish the projects restarts then moitor the pace of work. If you are confident that the new builder will complete the house in time then you can wait to get the house and take advantage of price appreciation.
If your budget is stretched due to the increase in the loan amount, then you can cancel the deal and get your deposit back.

At present the interest rates are at peak. In such a situation, you can transfer your existing loan to a bank, whose rates are lower. This will help in reducing the interest burden and EMI. However, it is a bit of a hassle. If you are taking a home loan for the first time, then talk to 4-5 banks. Choose the bank that gives the loan at the lowest rate. Negotiate on other charges including processing fee.