Builders won't get loans if they don't register under RERA: report

BT Online        Last Updated: August 8, 2017  | 12:35 IST
Builders must register under RERA
Builders must register under RERA

It's getting tough for builders unwilling to register under RERA with banks deciding not to give loans to them.  According to a report on the Economic Times, banks have decided they will not provide credit to unregistered builders after discussions with the Reserve Bank of India. The decision aims to weed out fly-by-night builders. Banks want a stronger security mechanism, and have even suggested keeping personal properties of promoters of some real estate firms as additional collateral.

Banks are getting increasingly cautious about whom they are lending in the real estate sector. "If a loan turns bad, customers will be refunded but there's no inherent protection for us under the law," the Economic Times quoted a bank official as saying.

The Real Estate (Regulation and Development) Act , 2016 had come into force on May 1. Many states diluted the rules before implementing RERA. Some big real estate companies have even urged central and state governments for greater clarity on RERA rules.

"Both state and central governments need to come out with clear rules and guidelines to avoid any ambiguity as the industry is in a state of confusion. If implemented right, RERA can bring back positive sentiments in the industry, and the much-needed transparency and professionalism," Sam Chopra, founder and chairman of RE/MAX India, told Money Today.

Under RERA, there are fines and penalties if a developer does not adhere to delivery guidelines, including existing projects. The Act ensures that you can secure interest as penalty from your builder at the prescribed rate. But the rate of interest may vary from state to state.


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