What changed
Following a Bombay High Court observation, RBI now requires urban cooperative banks to insert a specific clause in housing loan terms. This clause mandates builders to disclose the bank's mortgage in all promotional materials and advertisements, and to indicate they will provide a No Objection Certificate for property sales.
What it means for you
Banks must now enforce transparency in housing project financing by ensuring borrowers disclose mortgage details to property buyers. This reduces legal risks and protects banks' security interests. Non-compliance means funds cannot be released until the builder fulfills these disclosure requirements.
What you must do
- Update your housing loan sanction terms to include the mandatory disclosure clause as specified.
- Verify that builders/developers disclose the mortgagee bank's name in all brochures, pamphlets, and advertisements before releasing funds.
- Ensure builders commit to providing a No Objection Certificate (NOC) for sale of flats/property when required.
- Do not disburse any loan tranche until the builder has complied with all disclosure requirements.
Who it affects
Primary (Urban) Cooperative Banks, Builders and developers of housing projects, Home buyers and property investors
What specific information must builders disclose in their advertisements?
Builders must disclose the name(s) of the bank(s) to which the property is mortgaged in all pamphlets, brochures, and advertisements, including in newspapers and magazines.
When can a bank release funds for a housing project under this circular?
Funds can only be released after the builder/developer has fulfilled the disclosure requirements, including mentioning the mortgage and commitment to provide NOC.
Does this circular apply to all types of housing finance from urban cooperative banks?
Yes, it applies to all eligible housing schemes financed by urban cooperative banks, as referenced in the Master Circular on Housing Finance dated July 1, 2009.