I am interested in buying a flat in Building named "A1" (survey no.39/4A1) at Olympeo Riverside, Neral (RERA no.P[deleted]). However, the land on which the building A1 is constructed is mortgaged to Bank of India for 9 crores. At the same time, the project is approved by Bank of India for home loans. The builder claims that it is usual practice for builders to mortgage land to obtain construction finance and that there is no risk involved for customer as BOI will provide NOC stating that if builder fails to repay the 9 crore loan, other assets of the builder will be sealed and the customers staying in A1 will not be affected. Do you think it would be safe to purchase a flat in this project knowing that land is mortgaged? Is it really 'normal practice' as the builder claims?
It is usual practice of builders to mortgage land for construction purposes
2) if you are interested in buying flat take loan from bank of India
3) check whether project is registered with RERA
4) whether building plans sanctioned
5) bank would issue NOC to builder fir sale of flat
Yes, this is a regular and common practice.
As long as the builder is getting the NOC for you from the concerned Bank, you may go ahead with this purchase.
NOC is to be obtained before registration.
1. yes you may go ahead and purchase the land. this is a usual practice which the builder undertakes.
Go ahead and purchase the said flat
Regards
Yes most of the building projects are finance from financial.institution and the amount builder collect at initial offers. No one has that much capital to invest. So go ahead it safe.
Also bank provide loans for only approved.projects.so no worries it's safe.
Take Noc before registration.
hello sir, what builder claims is a general practice followed by the builder to obtain loan for construction..Even if he defaults your ownership for the flat will not be affected .. you can proceed further without worry
1. Yes, this is the practice followed by banks by which they give loan by mortgaging the entire project (i.e. the land and also the building to be constructed thereupon on a later date) and also provide loan to individual buyers of the flats constructed on the said building mortgaging the said flats also.
2. This way practically, those flats with undivided shares of the land (which constitutes the entire project area) are mortgaged twice i.e. once by the builder and then by the individual flat buyers.
3. You shall have to take an affidavit from the bank affirming that it will not initiate SARFAESI proceeding on your individual flat in case the builder's loan account becomes NPA and will not consider your flat as has been mortgaged by the builder for the loan he has availed to complete his project.
4. Once you avail such affidavit, you can go ahead with the plan of buying the said flat.
If the Same bank is providing home loans you can be assured that your interest will be safeguarded as you will be repaying loan amount for that building. So even if builder fails to repay mortgage amount the property value recovered as you people will be paying loan amount to same bank. Some builders do follow this procedure.
It is normal to raise loan and to construct the building by the builder.
In your case please ask the builder to get an NOC from the bank stating the bank has received the portion of loan with respect to the Flat and will not claim anything against the Flat.
This kind of issues are common especially with the builders undertaking big projects like this.
Though it is not a healthy practice especially for a buyer who has to invest his lifetime money into this assets, he may better obtain a proper legal opinion from a local and experienced lawyer to doubly confirmed about the safety and other issues that would endanger the purchase of this property at a later stage.
You can produce the relevant papers/documents before the lawyer and seek his suggestions and opinion for buying this kind of property.
Dear Sir,
Though it is a normal practice to mortgage land in favor of bank but it will be in case of reputed builders only. Some times the builder and bank people collude with each other and thus huge loss will be incurred by the flat purchasers. You may go for purchasing any other land another flat of which documents are very clear.
you can purchased the flat there is no harm in it
Hello. Thanks for answering. I requested the builder to share a copy of NOC with me (that was issued to another buyer). I have pasted some relevant points from the NOC below. Are points 5 and 6 sufficient to safeguard the interest of buyer and protect him/her from liability in case builder does not pay mortgage amount? NOC for sale of flat...to Mr... 1. Bank of India, Turbhe branch has registered mortgage charge over the project site of (builder) Survey no... 2. The mortgage created by registering the charge on above mentioned property i.e. site of the project including land structure and building consisting of flats, shops units, club house etc. 3. The charge on flat no...which is one unit in the above project shall be released provided all consideration/monies relating to flat are deposited in C/A ... of (builder) at Turbhe branch. 4. We have no objection to entering into agreement for sale for said flat subject to depositing sale price/consideration in above mentioned a/c. 5. Our charge on flat shall be released upon receiving full payment of agreed value of flat as agreement for sale. 6. It is the responsibility of the purchaser of flat/shop to ensure that: a. Copy of agreement is submitted to Bank of India, Turbhe Branch b. Specific release of our charge on flat should be obtained by making full payment. 7. The financing bank should ensure that the consideration for the flat is directly credited/remitted by...to above mentioned Escrow account.
Clause 5 and 6 protects your interests
Yes they are enough to safeguard buyers interest. As you pay complete amount of flat charge on your flat shall be remitted and there shall be no mortgage on it . In any case if builder fails to pay you donot have any responsibility.
Your concern about the points what you have mentioned is unnecessary.
This is an usual and routine format.
You can concentrate on any other legal formality that might not have been revealed.
1. The clause no.5 & 6 are sufficient to bind the purchaser in making repayment to BOI in the current account of the builder towards the loan taken by the builder for constructing the said flat. Actually the BOI is insisting you to pay more than what they have advanced towards construction of the said flat on pro-rata bases since it is collecting the profit of the builder also while insisting deposit of the entire amount.
2. the above two clauses are protecting the interest of the lending Bank and is completely to the one sided being to the Bank's side.
3. There is nothing to protect the interest of the buyers since after completing receipt of full payment (from all the flat buyers) towards the loan the bank will not take any further payment (since the rest amount of sale proceeds will be towards the profit of the builder which may be even 100% of the loan taken i.e. if all the buyers pay 50% of the price, the Bank's loan given to the builder will be repaid) and thereafter if the builder takes another 30% to 40% from the flat owners and runs away without registering the sale deeds for the flats, then the buyers will be at a larch.
4. There should be tripartite agreement with the builder, the bank and the buyer wherein the buyer will agree to deposit the entire sale proceeds to the lending bank and and the bank will have no claim on the said flats if the deposits of the sales proceeds are directly deposited with the bank.
5. If the bank does not want to enter in to such agreement, they should give NOC on that line only and the buyers will have no responsibility for any act of the builder towards the repayment.
Dear Friend pls meet in person for all the above queries.
My contact number
Have you gone through such kind of agreement between bank and builder. If not then on what basis it is determined. Normal practice can't be an evidence. So go through all the legal documents before proceeding.
