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Lender to take Permission from RERA Authority before Auctioning Projects

Lender to take Permission from RERA Authority before Auctioning Projects

PNB Housing finance ltd. decided to auction the project of Supertech to recover its dues. One of the buyer approached RERA on this decision. 

The RERA authorities stayed the auction.  About 950 homebuyers have invested Rs 328.19 crore in the project. “The financial institutions/lending banks/creditors have to take prior approvals from the authority at two stages - first before initiating the auction of real estate project and second at the time of transferring the auctioned property to the new buyer,” Haryana RERA said. The authority has also said that in future before auctioning any project, banks have to take prior approval of RERA and 2/3rd of home buyers. Banks need to take care of the rights of the allottees.  In case of failure of the banks to ensure that the funds were applied for the purpose they were granted, banks cannot be allowed to supersede the rights of the allottees. RERA authority emphasised on the role of banks that before providing loans banks to ensure that the loan payments are released to the promoters after due verification of the fact that the payment so released is actually utilized towards the construction of the project. “The lending institutions/individuals shall be held equally responsible if the amount, so released is not put into construction purpose and is allowed to be diverted,” authority has said.

This order of RERA authority will be hurting lot of lenders who are suffering due to non- repayment during lockdown. According to the authority, promoters usually mortgage their project land as well as all receivables from the sold/unsold inventory to lending organisations to get loans to fund the construction costs.

But when these promoters fail to repay the loans taken, then the financial institutions directly auction residential or commercial properties that have been pledged with them to recover loans from borrowers by invoking the SARFAESI Act, 2002. “Such auctions invoke great anguish and distress among the buyers and allottees. 
In such cases, The lenders are required to take due permission from RERA authority before auctioning such mortgaged properties/ projects.

 

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