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Rachna (Director)     18 August 2012

Need to understand 'undertaking' doc for taking home loan

Hi need urgent help from my lawyer friends. I am in process of acquiring a home loan through Axis Bank for a under construction property I have bought. The loan is approved however now at the time of disbursement, I have been asked to sign a few documents by them which are unclear to me. First of all they are asking me to sign a general undertaking document the purpose for which is to ask the owner to buy insurance on the said property in lien of the bank. My arguement to them is that my property is already mortgaged with them and they hold all rights over my property and also there is a clause in my builder/buyer agreement which states that insurance of building will be bought which will be payable by the owner. This according to me covers the fact that building/ part of the building is insured by me as a owner and since as per my bank agreement I am liable to pay my dues to bank I am capable of paying this by taking this insurance. Why would I need to specifically take insurance in Lien to the bank? I would like to know from my friends if there is any foul play by the Bank here since I asked them to send me this explanation on a letter head and they are not sending it to me on official record. They saying we have mentioned it in our sanction letter which should suffice. I need help on this on a urgent basis. Please do help. Let me know if you would like to see the sanction letter to see the fine print?



Learning

 1 Replies

c.p.s. ramachary (1500)     18 August 2012

The bank is right in insisting for assignment of insurance covering the flat under construction for the follwing reasons.

1. If the flat is lost (God forbid) in natural calamity the bank will not have any other security except the undivided portion of the land over which the flat is being constructed and the value of the undivided share of the land may not even cover 20% of the loan amount.

2. Sale of undivided share in the land without flat will be loss to the bank.

Insurance cover if assigned to the bank it may help your self in reducing the burden of repaying the loan borrowed and it will also be a relief to the bank as it would recive a portion of amount covering the loan liability.


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