What Happens when the Developer Defaults on his Loan?
Mar 13, 2019 Home Loan
As a buyer, we make sure that we have done everything correctly, from the documentation to the careful planning of the financial implication that comes with it. But not everything is on our hand, especially the developer’s work pace and the construction.
A project can get stuck in limbo if the developer fails to make the payments on time. In such a case, its not only the developer who is in trouble with the bank but also the buyer who is stuck in the middle of the tussle between the banks and the developer.
What can a buyer do in such a case? What happened to the developer if they are not able to pay back the bank the amount they have borrowed? We discuss them below.
When a developer fails to make the payment, the lender starts with the first step which is treating the project as a symbolic possession. The lender will stick the notice informing the public about the default from the developer. The developer can then approach the bank and try to settle the matter. They can use their personal belongings or other surplus amounts to pay back the lender. The developer can continue the project and hand over the flats to the respective buyers.
However, if the bank and the developer fail to find a midway, the bank will start to take possession of the project. In this case, the bank or the lender, under no circumstances, will want to demolish the project. The best option for the bank is to sell the property to another developer. The never developer will serve the loan differently.
A project can get stuck in limbo if the developer fails to make the payments on time. In such a case, its not only the developer who is in trouble with the bank but also the buyer who is stuck in the middle of the tussle between the banks and the developer.
What can a buyer do in such a case? What happened to the developer if they are not able to pay back the bank the amount they have borrowed? We discuss them below.
When a developer fails to make the payment, the lender starts with the first step which is treating the project as a symbolic possession. The lender will stick the notice informing the public about the default from the developer. The developer can then approach the bank and try to settle the matter. They can use their personal belongings or other surplus amounts to pay back the lender. The developer can continue the project and hand over the flats to the respective buyers.
However, if the bank and the developer fail to find a midway, the bank will start to take possession of the project. In this case, the bank or the lender, under no circumstances, will want to demolish the project. The best option for the bank is to sell the property to another developer. The never developer will serve the loan differently.
Does it affect the ownership of the buyer?
No, none of it affects the ownership of the property or the unit of the buyer. The ownership remains the same. Though there would be some name changes in the deed which is handled by the developer, if the project gets caught in such a struggle, then the buyer must make sure all their documentation is in place. If the buyer holds a proper sales deed, builder buyer agreement and registration and stamps duty receipts, then they are protected.
If the situation makes you uncomfortable and you feel the need to sell the property, then you have the right to do so.
Under construction project getting in the cross, fire can affect the buyer and their finances. The buyer can approach the RERA and ask for the resolution in the matter. The institutions and organisation are working for the buyer’s benefit.
If the situation makes you uncomfortable and you feel the need to sell the property, then you have the right to do so.
Under construction project getting in the cross, fire can affect the buyer and their finances. The buyer can approach the RERA and ask for the resolution in the matter. The institutions and organisation are working for the buyer’s benefit.
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