My friend is planning to buy a plot from a RERA approved project in a gated community in Bangalore. The project is fully completed by an experienced builder and plots are ready for house construction.
Legal documents are all clear. The builder has a tie up with 4 or 5 reputed banks and plot loans are available for the same.
When he contacted a very reputed bank (say ABC) for home loans which had tie up with the builder, the loan executive asked him for the survey number where his booked plot falls under. Executive told that there is one particular survey number in the layout which is NOT approved by the ABC bank. The reason he gave is that it is in the name of the director of the company and not in the name of the company itself.
On examining the documents, my friend came to know that a portion of his booked plot falls in the same survey number. He also came to know that
- Out of 3 survey numbers in the layout, 2 are owned by the company and 1 by the director of the same company as an ‘individual’.
- 25% of the plots fall in the survey number owned by the director.
- All the survey numbers are mentioned in DC conversion letters and various approval letters. The company is represented by the director in all the sale deeds, approval letters and the letter of release of plots by the concerned authorities.
- The director has signed in a authority letter where he has agreed to give the land to the municipal authority for the purpose of park, roads etc. He has mentioned all the survey numbers(including those owned by him as an individual and as the company director)
- The pro forma of the sale deed mentions all the survey numbers and mentions that the vendors are both the company(represented by the managing director, who is the director’s family member) and the director as an individual.
His plot falls under 2 survey numbers - the one which is in the company’s name and the other one in the director’s name. According to ABC bank home loans CANNOT be approved by them for such plots which falls or share the survey number owned by the director as an individual. Their argument is that there is no Joint Development Agreement between the company and the individual. The survey number is in the individual’s name and not in the company’s name.
But some other equally reputed nationalised and private banks have approved similar such plots(falling in that survey number) in the same layout.
However, according to ABC it is a violation of the company law. ABC can disburse the loan only to the plots owned by the company. ABC loan manager even told that the loan was initially approved for similar plots in the same layout but got rejected when it was about to be disbursed. They don’t want to take risk. The executive further explained that some smart builders keep some shares in the layout in their individual name so that they can avoid higher tax that would have incurred had they sold it through the company. In such cases, among the two cheques disbursed as the loan from the bank, one would go to his personal bank account and the other one to the company’s bank account opened as per RERA guidelines. Some banks do seem to split the loan cheque to multiple vendors in such cases, while ABC does not do that.
Builder is saying, it is problem with ABC bank’s loan process and my friend can get home loan from other banks. He even mentioned some other buyers of plots from the same survey number who have already got the loan from another reputed bank.
My friend is having the following doubts:
- Is Joint Development Agreement necessary in the above scenario ? How do banks disburse loans in such cases of multiple vendors owning the property ?
- Is it safe to buy this plot from legal point of view ? Is this a problem only with the loan disbursement or is the builder doing something illegal ? E.g Can the owner mortgage the plots falling in his survey number in the absence of JDA ?
- Even if he manages the finance from some other bank, will there be a problem when he wants to sell it in the future ? (either before or after he clears off the loan). Can it get into any legal complications ?
- As per the sale deed format given, they give only Khata number for each registered plot and survey number doesn’t seem to be mentioned for each plot. Will there be again a problem for resale if they dig the old survey numbers from the Khata ? During the resale, can the loan for another buyer be rejected on the grounds of the same reason in the future ?
Advice from experts would be appreciated.
