Builders must disclose land mortgage

By Murari Chaturvedi

In the days of mega projects where the land acquisition by builders run in several hundred crores of rupees, the land has to be mortgaged by the builders. The flat buyers are often not told that the building in which they have purchased a flat, stands on the mortgaged land. In order to bring transparency in the housing industry, the reserve Bank of India has asked the builders to make a public discloser about the land mortgaged to banks. The builders has also to mention the name of the Bank holding mortgage of the land in their advertisements and in all their brochure of the project. Further they will also have to take the permission of the Bank while selling the flats constructed on such mortgaged lands. The Bombay High Court observed that the bank granting finance to the developer for their housing projects, should insist an disclosure of charge or any other liability on the plot in all their publicity material inviting public to purchase flats constructed on such lands. The RBI has further said that this should be included in terms and conditions by the Banks sanctioning loan to builder. Further the funds should not be released for the development unless these requirements are fulfilled by the developers. The flat purchasers does not know about these intricacies and often pays huge amounts to purchase a flat in the building constructed on the mortgaged land. In fact this is the new circular of RBI, to safe guard the interest of flat purchaser who are paying huge amounts to purchase a flat of their own. The Banks must also insist to obtain N. O. C. from them by the builders to advertise their projects. This will bring much needed transparency in the real estate transactions and save the flat purchasers and their huge investment while purchasing a flat. The property law in the country are complex and beyond the apprehension of common flat purchaser. This circular will go a long way to clear the cob-web while
purchasing a flat by the common man.