6 years ago
Friday, February 27, 2009
US Mortgage v/s Indian Home Loan
I am watching US Mortgage scenario very closely for almost a year. What I understood and clear about one thing that the recession starting from USA and trigger point was US MORTGAGE.
US President also acknowledge this problem, at number of time and at different forum and meetings.
Why it happened and why we should watch our real estate developer because the developer uses their customer to raise money from market by using Mortgage or Home Loan very effectively.
In India if a developer want to raise money from bank then they have to go for project appraisal and have to provide extra collateral ( Property as security) and have to pay interest @15% per annum.
Home Loan is liability of customer and not developer, Developer give discount on property as Down payment discount or takes money on construction demand basis. The Customer pays money to bank as EMI or Pre EMI.
Very recently I came across a new trend where developer looks for high net-worth individual, who can borrow good sum of money. The developer take very less or no money and issue receipt on PDC. Further developer undertakes to pay EMI of Customer for a period of construction time. The developer further enters into a buy back agreement with customer to purchase property back at pre-decided rate.
What is the catch or problem with this exercise?
Developer issue few papers to banker (HFC) and they are as follows:
§ Builder Buyer Agreement
§ Permission to Mortgage
§ Tripartite agreement
§ Money receipt
Apart from these, Developer provides all photocopy of land documents and photocopy of approvals and Maps for project approval form Home Loan Bank or HFC.
In Permission to mortgage and TPA, the Developer promises to Bank or Home Finance Company that they will not transfer the property without the permission of Bank or HFC.
See in this case, if developer go through tough time and do not pay the EMI, then who going to be loser.
If developer stops his project then how bank going to recover the money. Will bank people run after the borrower or the developer?
There are so many questions and no body know the answer, but I can say one thing that Indian Home Loan is also sitting on a Time Bomb and it can blow at any time.