Home › Circulars › RBI/2005-06/310

Real Estate Lending: Clearances Before Disbursement

No longer current — withdrawn, no replacement on file yet
Source: Reserve Bank of India · RBI/2005-06/310 · issued 01 Mar 2006 · ~1 min read
Quick answerRBI mandates banks to disburse real estate loans only after borrowers obtain all required government clearances, though sanctions can proceed earlier. This curbs risky lending by ensuring project approvals are in place before funds flow.

What changed

RBI directed banks to ensure real estate borrowers have prior government/local authority clearances before loan disbursement. Sanctions can be done in normal course, but disbursement must wait for clearances. This tightens the loan approval process to reduce excessive risk.

What it means for you

Banks must now verify statutory approvals before releasing funds for real estate projects, adding a compliance step. This reduces the risk of lending to projects that may face legal or regulatory hurdles, protecting asset quality. Lenders need to update their disbursement workflows and borrower documentation checks.

Historical instruction — do not use for current compliance. This is what was required at the time; it no longer reflects current RBI requirements. If no replacement rule is linked above, that only means none is recorded on our register yet — it does not prove no later applicable rule exists. Confirm on the official RBI source below.

What banks were required to do at the time

Who it affects

All scheduled commercial banks, Real estate lending teams, Credit risk and compliance departments, Borrowers in the real estate sector

❓ Common questions

Regulatory timeline

Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).

Can we sanction a real estate loan before the borrower gets government clearances?

Yes, the circular allows sanction in normal course, but disbursement must only happen after the borrower obtains all required clearances from government or statutory authorities.

What types of clearances are needed?

The circular refers to prior permission from government, local governments, or other statutory authorities for the project, wherever required. The specific clearances depend on the project and location.

📜 This document’s life story (1 recorded event, each backed by RBI’s own words)
Repealed by RBI/2025-26/100 — Consolidation of Regulations — Withdrawal of circulars (28 Nov 2025)
RBI’s words: “Official withdrawal register entry #2699: DBOD.BP.BC.65/08.12.01/2005-06 — "Banks' Exposure to Real Estate Sector" dated March 1, 2006”
📜 Read the original circular — full text as issued by RBI
RBI/2005-06/310 DBOD.BP.BC. 65 /08.12.01/2005-06 March 1, 2006 Chairman and Managing Directors/ Chief Executive Officers of All Scheduled Commercial Banks Dear Sir, Banks’ Exposure to Real Estate Sector As you are aware, there has been substantial increase in lending by banks to the real estate sector during the last few years. While the development of real estate is welcome, there is a need for the banks to curb the excessively risky lending by exercising selectivity and strengthening the loan approval process. 2. In this context, we advise that while appraising loan proposals involving real estate, banks should ensure that the borrowers should have obtained prior permission from government /local governments/other statutory authorities for the project, wherever required. In order that the loan approval process is not hampered on account of this, while the proposals could be sanctioned in normal course, the disbursements should be made only after the borrower has obtained requisite clearances from the government authorities. Yours faithfully, (P. Vijaya Bhaskar) Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2005-06/310 · issued 01 Mar 2006. The plain-English explanation above is BankPulse’s own independent summary.
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BankPulse Compliance Evidence Pack — generated 05 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly).
Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=2769&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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