Developers can prove home loan to flat purchasers
2) loan agreement would be valid
Can a developer provide home loans with interest to a home buyer?
Can a developer provide home loans charging interest to home buyers keeping the banks out of the purview. ? If yes, can a legal paperwork be setup exclusively between the home buyer and developer just like how bank does that is valid in court of law?
Asked 4 years ago in Property Law
Religion: Hindu
27 Answers
Developer are not allowed to act like a Bank and collect the interest accordingly. But yes to make a sale deed confirmed Developer can make a first sale deed on owner's name and same time after a week a POA for mortagage that has rights to auction or re-sale if the EMIs are not paid (certain EMI's continously 12 EMIs are not paid) inthis way you can calculate the sum amount and mention in the payment schedule and give them to buyer agreement.
There is no such method but there is no legal bar in doing it. You need to execute a valid agreement with the builder for the same
No, developer cannot charge interest on home loan and only bank and non banking financial institution can provide home loan.
If builder is providing than good for buyer. Because in case of default in repayment, builder cannot auction the property for recovery.
The developer can lend money only in case he is registered money lender. He can lend you money and can make a registered loan agreement.
Unlicensed money lending and charging interest is illegal.
No one except the bank or NBFC and in limited sense some individual having money lending licence can lend money.
So if the builder runs such business he can be criminally prosecuted.
- No , a developer is not authorised to sanction home loan to home buyers , like banks .
- Many developer after keeping the buyer in dark , mortgaged the property to the bank for using the said loan amount, is offering the home buyers the flat on loan .
- If you will take home loan from the developer then he will keep your title documents with them as mortgaged, hence in future , the said developer can put some more conditions .
- Hence, one should avoid such type of transaction with the developer.
It is advised to get a photo copy of all the papers. Go through it. If possible, take the help of senior civil lawyer. Understand the pros and cons of the agreement and then sign the papers.
If the developer is a registered financial society than only he can give loan.
Otherwise it is illegal.
A developer if he had the license can offer loan as a company providing finance can also have other branch handling real estate.
Yes,Definitely it is allowed provided it is a Finance Company as separate legal entity.
Dear Sir,
However, the said thing can be done by the bank or NBFC but in some cases this also becomes valid and the acceptable. Things depend on facts and circumstances of the case.
The developer can provide home loan out of his own funds to the buyer in the capacity of lender.
The agreement for such loan, being registered shall be valid in the eyes of law.
1. Giving Loans and Collecting Interest is possible only for Banks /NBFCs /other Financial institutions, under the RBI rules and the state money lending laws.
2. However, with a little twist, the Principal amount and calculated interest amount can be combined, to form aggregate sum as "consideration price" and such consideration price can be offered as EMI to the clients. Anything else shall remain illegal and a prosecutable offence.
Property developers can't service loans on customers.
Yes if developer have firm for providing loans Like non banking financial firm then he can provide loans to home buyers and charge interest on loan.
That is not a legal procedure. He may do it and it may be going on.
The Developer Says that I dont need to take home loan, I just need to pay EMIs directly to him where he will charge rate of Interest on the Principal Amount. E.g. Principal Amount 100000, RoI: 4% Tenure 10 Years which gives 10,00,000+2,15,000 =12,15,000/- and EMI comes to 10,150. Can the developer give this sort of facility to the home buyer or having a non banking finance licence is a must for him?
Asked 4 years ago
Developer must have license for commercial loan.Otherwise his business of advancing loan becomes illegal.
if builder hv lending license then he can provide.
Your EMIs will start only when builder offers possession.
See if interest is added in principal and the total amount is shown as principal towards the purchase of such property than based on the agreement to sale you may enter into such arrangement with the developer.
Developer in order to sell the flat is offering at low rate of interest
ask him to give in writing rate of interest charged , amount payable per month etc
No. But no risk to you.
No builder cannot give this facility. It is illegal
Dear Sir,
Though the builder may not be having such a license but the said activity can be done as per your convenience.
Yes, the developer can offered for payment in instalment for the person who is not interested or eligible to get loan from the bank .
- However, there must be an agreement for the same dully registered from the office of the registrar.
- Further , without having a licence ,no person is allowed to give any type loan legally.
Yes he can. It's like a subvention scheme. Just execute an agreement in writing for for the same
It is purely an understanding and an agreement between the buyer and the builder who is providing the loan.
If you find this feasible and do not have any legal hassle in future, you can proceed accordingly.
He may require you to furnish collateral security for this loan, so you may have to be cautious on that aspect.
There is no illegality in lending this type of loan, if at all there is any problem the builder only will face legal problems to recover the amount advances by him.
The rate of interest seems to be on a higher side and is not reducing on the repayments through EMI, so this is an exorbitant interest, therefore you analyse all the facts before venturing into such attractive traps.