What changed
RBI has mandated that banks financing housing projects must include a clause in loan terms requiring builders to disclose the mortgagee bank's name in all promotional materials. Builders must also state they will provide NOC from the bank for property sales. This is a new condition beyond the earlier master circular guidance.
What it means for you
Banks must update their loan agreements for housing project finance to include these disclosure clauses. Lenders need to verify compliance before releasing funds, adding an extra step in the disbursement process. This enhances transparency for homebuyers and reduces legal risks for banks.
What you must do
- Amend loan sanction terms for housing projects to include mandatory disclosure of mortgage details in all builder advertisements and brochures.
- Ensure builders commit to providing NOC from the mortgagee bank for sale of flats/properties.
- Verify compliance with these disclosure requirements before releasing any funds to the builder.
- Update internal checklists and disbursement procedures to include this verification step.
Who it affects
Scheduled commercial banks (excluding RRBs) financing housing projects, Builders and developers availing project-specific loans, Homebuyers purchasing flats in such projects
What specific information must builders disclose in their brochures?
Builders must disclose the name(s) of the bank(s) to which the property is mortgaged, and indicate that they will provide a No Objection Certificate (NOC) from the mortgagee bank for sale of flats, if required.
When must banks ensure this compliance?
Banks must ensure compliance before releasing any funds to the builder. The disclosure requirements are a precondition for disbursement.
Does this apply to all housing finance or only specific projects?
This applies to finance granted for specific housing or development projects, as referenced in the master circular on housing finance.