NBFCs Must Disclose Property Mortgage in Housing Project Ads
Current · Source: Reserve Bank of India · RBI/2009-10/450 · issued 06 May 2010 · ~1 min read
Quick answerRBI mandates NBFCs to include a clause in housing project loan terms requiring builders to disclose mortgage details and NOC availability in all advertisements and brochures.
The rule, in the simplest words
When giving a loan for a housing project, the NBFC must add a rule that the builder must put the name of the mortgagee (the bank or lender that holds a loan on the property) in every brochure, advertisement or pamphlet.
The builder must also say in those same ads whether a No Objection Certificate (NOC – permission from the mortgagee to sell the flat) is needed for the sale.
The NBFC cannot release any money for the project until the builder has shown these disclosures and, if required, the NOC.
These steps protect home‑buyers from hidden loans on the property and lower legal risk for the lender.
How it plays out — a real example
Rohit, a senior loan officer at an NBFC in Mumbai, receives a loan request for a new apartment complex. He checks the developer’s brochure and sees the mortgagee’s name, XYZ Bank, clearly printed, and a note that an NOC from XYZ Bank will be provided before any flat is sold. Because the brochure meets the RBI rule, Rohit approves the fund release, confident that buyers won’t face surprise loans later.
What changed
RBI issued a circular on May 6, 2010, directing NBFCs to incorporate a specific clause in loan terms for housing projects. This clause requires builders to disclose the mortgagee's name in all promotional materials and indicate if a No Objection Certificate (NOC) from the mortgagee is needed for property sales.
What it means for you
NBFCs must now enforce transparency in housing project financing by making mortgage disclosures a precondition for fund release. This protects homebuyers from hidden encumbrances and reduces legal risks for lenders. Non-compliance by builders can delay or stop disbursement of sanctioned loans.
What you must do
Update loan sanction letters for housing projects to include the mandatory disclosure clause.
Verify that builders' brochures and advertisements mention the mortgagee's name before releasing funds.
Ensure builders provide a NOC or permission from the mortgagee for property sales, if required.
Train credit and legal teams on the new stipulation to ensure consistent compliance.
Who it affects
All NBFCs financing housing or development projects, Builders, developers, and owners of housing projects, Homebuyers purchasing flats in such projects
❓ Common questions
What triggered this RBI circular?
The Bombay High Court observed in a case that banks financing housing projects should ensure disclosure of property mortgage in project brochures, leading RBI to extend the requirement to NBFCs.
What happens if a builder does not comply with the disclosure requirement?
NBFCs must not release funds to the builder until the disclosure clause is fulfilled, as per the circular's directive.
📜 Read the original circular — full text as issued by RBI
RBI/2009-10/450
DNBS (PD) C.C No. 174 /03.10.001/2009-10
May 6, 2010
To All Non- Banking Financial Companies
Dear Sir/Madam,
Finance for Housing Projects – Incorporating clause in the terms and
conditions to disclose in pamphlets/brochures/advertisements,
information regarding mortgage of property to the NBFC
In a case which came up before the Hon’ble High Court of Judicature at Bombay, the Hon’ble Court observed that the bank granting finance in housing, should insist on projects, disclosure of the charge or any other liability on the plot in question or development project being duly made in the Brochure or pamphlet etc. which may be published by developer/owner inviting public at large to purchase flats and properties. The Court also added that this obviously would be part of the terms and conditions on which the loan may be sanctioned by the bank.
2. Keeping in view the above, it is felt desirable that while granting finance to housing / development projects, NBFCs also should stipulate as a part of the terms and conditions that:
(i) the builder / developer / owner / company would disclose in the Pamphlets / Brochures / advertisements etc., the name(s) of the entity to which the property is mortgaged.
(ii) the builder / developer / owner / company should indicate in the pamphlets / brochures, that they would provide No Objection Certificate (NOC) / permission of the mortgagee entity for sale of flats / property, if required.
3. NBFCs are advised to ensure compliance with the above stipulations and funds should not be released unless the builder / developer / owner /company fulfils the above requirements.
Yours sincerely,
(Uma Subramaniam)
Chief General Manager-in-Charge
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2009-10/450 · issued 06 May 2010. The plain-English explanation above is BankPulse’s own independent summary.
Update loan sanction letters for housing projects to include the mandatory disclosure clause.
📜 Compliance
Verify that builders' brochures and advertisements mention the mortgagee's name before releasing funds.
Ensure builders provide a NOC or permission from the mortgagee for property sales, if required.
Train credit and legal teams on the new stipulation to ensure consistent compliance.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are a Credit Manager at a bank this circular applies to (All NBFCs financing housing or development projects, Builders, developers, and owners of housing projects, Homebuyers purchasing flats in such projects), your first concrete step on “NBFCs Must Disclose Property Mortgage in Housing Project Ads” is: “Update loan sanction letters for housing projects to include the mandatory disclosure clause.” (RBI issued this 06 May 2010).
Circular: RBI/2009-10/450 -- NBFCs Must Disclose Property Mortgage in Housing Project Ads
Issued: 06 May 2010
Action required: Update loan sanction letters for housing projects to include the mandatory disclosure clause.
Action required: Verify that builders' brochures and advertisements mention the mortgagee's name before releasing funds.
Action required: Ensure builders provide a NOC or permission from the mortgagee for property sales, if required.
Action required: Train credit and legal teams on the new stipulation to ensure consistent compliance.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
💬 Banker Discussion
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 03 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=5660&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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