Finance for Housing Projects- RBI asks NBFCs to insist on mortgage disclosure by housing developers

May 06, 2010: Reserve Bank of India (RBI) has stipulated that while granting finance to housing / development projects, NBFCs should stipulate as a part of the terms and conditions that:

(i) the builder / developer / owner / company would disclose in the Pamphlets / Brochures / advertisements etc., the name(s) of the entity to which the property is mortgaged.

(ii) the builder / developer / owner / company should indicate in the pamphlets / brochures, that they would provide No Objection Certificate (NOC) / permission of the mortgagee entity for sale of flats / property, if required.



NBFCs are advised to ensure compliance with the above stipulations and funds should not be released unless the builder / developer / owner /company fulfils the above requirements.

RBI's new guidelines for NBFCs are similar to those followed by banks. Although the RBI has made it mandatory for banks to make sure that the bank's name is mentioned as the mortgagee in the publicity material issued by the developer, the same rule was not applicable for NBFCs. This is expected to bring greater transparency in the construction industry and create awareness among potential flat buyers.





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