Pre-Approved Project is another Marketing gimmick from builders to lure buyers. Every third query from Home Loan seeker addressed to me is related to under construction Pre-Approved Project. Almost every related article on Internet highlight the advantages of availing Loan from a lender which has pre-approved project for Home Loan. Pre-Approved Project is nothing but a confirmation that specific Bank / HFC has verified the legal & technical documents of project and found them in order. Any buyer who apply for Home Loan through such Bank / HFC need not to again undergo legal verification process of project. Builder force the buyers to avail Home Loan only from Bank / HFC which has Pre-Approved Project. In one of the case, i came to know that 100% buyers availed Home Loan from single HFC only. USP of Pre-Approved Project is that Home Loan will be Hassle free and Processing will be fast with bare minimum documentation.
Most of the buyers are not aware that through these kind of tie ups builder make money by taking cut from Bank / HFC & in return guarantee X% business from Project to specific Bank / HFC. It helps both the Builder and Home Loan Provider. Builder can sell project easily by projecting it as Pre-Approved Project i.e. Legally & technically safe and Home Loan provider gets good business from builder.
I strongly believe that you should not avail Home Loan from Home Loan lender which has pre-approved project because you will never come to know lot of fine details related to Project. You are investing your hard earned money and its a huge investment may be once in a lifetime for many buyers therefore it is not advisable to take short cuts. Lets check 5 Myths related Pre-Approved Project and why you should not avail Home Loan from such Banks
Pre-Approved Project is Legally Safe
In some cases in order to get business small Banks / HFC ignore very important legal aspects and approve project just to get business. One of reputed project in Bangalore do not have permission from 6 Govt Departments out of 17 mandatory Govt Permissions required in Bangalore. Irony is that this project Pre-Approved by 1 Banks & 2 HFC’s. In another case after getting project pre-approved from few lenders, builder mortgaged the project with Pvt bank. Technically and legally, buyer is not eligible for Home Loan on such projects but bank which pre-approved the project was providing Home Loan easily. In such cases, banks don’t take any legal guarantee. In case of any issue/dispute, if you default then bank will catch hold of borrower not the builder.
Less Documentation is Good
In pre-approved project, buyers are happy that there is Less documentation which is good. Its a myth, reality is that documentation is as usual cumbersome but you will not get many important documents related to project. Reason all the project related documents are shared by builder with Home Loan Provider directly. Home Loan Provider will never ask these documents from buyer thus you will never get access to these important project related documents from builder.
You cannot avail Home Loan from other Lenders
The father of all myths among buyers. Most of my readers write to me that their builder have informed that they can avail Home Loan only from Bank / HFC which has pre-approved project. Buyers cannot avail Home Loan from other lenders. It is not the case, you can take Home Loan from any Home Loan Provider of your choice even if the project is not pre-approved by this Bank / HFC . Only thing is you need to undergo complete project legal verification, which i always recommend. Please don’t take any shortcuts atleast in Home buying process. While going through legal verification process you will come to know, if there is any legal loophole in the project.
Pre-Approved Project will be completed on-time
Its a myth that Bank will ensure that Builder completes Pre-Approved Project on-time. Trust me there is no Guarantee taken by Bank / HFC in this regard. In Pre-approved Project Bank / HFC only confirm that they have legally & technically verified the project. Besides this there is no other guarantee from Bank’s end. Keep in mind that you are liable for re-payment of your Home Loan not the builder.
Guaranteed Home Loan
Last but not least, Builders assure buyer that their Home Loan will be definitely approved if they avail Home loan from Bank/HFC which has pre-approved project. Nothing like that, buyers Home Loan Eligibility is evaluated by Bank /HFC independently. There is no Guarantee that Home Loan on Pre-Approved project will always be approved by the Bank. Every Home Loan Borrower has to go through complete Loan eligibility cycle/process. There is no concession on this front from Banks / HFC’s.
Just to summarize, i always suggest to avail Home Loan from Bank / HFC which has not Pre-Approved Project. It is beneficial for you as you will go through entire legal verification process & will get all project related documents from builder. Though builder will discourage you from doing this but at the end of the day its your hard earned money and final decision should be yours.
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Dear Sir,
I have Booked the Flat in the Month of FEB2014 and the cost of the Flat is 30 laks . During the Booking , Builder told me that the Flat is 75% is constructed and will give possession in the Month of Dec2014.Then i started working on the Bank loan and Bank Sanctioned 22 Lakh and 21000 EMI per Month . Since buider demanded to bank only 15 Lakh , Bank disbursed 15 lakh out of 22 lakh and taking full EMI of 22 lakhs ..Now builder is postponing the possession time and i cant afford paying both EMI and Rent. Please advice me
You need to check in your agreement with the builder regarding penalty clause for delay in construction & claim compensation for delay according to agreement. Secondly, you should convert your EMI from Full EMI to Pre-EMI as it will reduce your financial burden. Under Pre-EMI, you will be paying only interest on amount disbursed till date. Lastly you may form the group of owners in same project to pressurize builder to expedite the construction. It is necessary else builder will keep delaying the project after super structure is built.
Thank You Sir . I spoke to Bank regarding the PRE EMI and they are telling Paying FULL EMI will be beneficial then paying only interest .. Please advice
Pre EMI option will reduce your monthly outflow. As you mentioned that you cannot afford both EMI and rent therefore i suggested Pre-EMI option to you.
You can change your EMI from Full EMI to Pre EMI without any penalty. Still you can check your Home Loan agreement.
Dear Sir,
I bought a resale flat which is 90 % complete May 2013 which is in a village in Panvel. Got possession of flat in October 2013. Since all flats haven’t got possession, we haven’t received occupation certificate yet. Will this be an issue later?
Thanks in advance
OC or Occupancy Certificate is issued only when the building is complete. You may demand partial occupancy certificate from builder for the flats which are ready to occupy.
Sorry I mentioned to add I have a HDFC loan.
Dear Mr. Nitin,
I had taken a home loan from ICICI bank for Rs. 25 lakhs. The loan was sanctioned on 30th May but was disbursed on 30th June. I started paying full EMI Rs.24375 from July 1st. Is that right? Should’nt the EMI start from only from 1st August?
Suppose your EMI payment / ECS date is 5th of every month then your date of commencement of FULL EMI will be 1st July, 2014 and Due Date of 1st EMI (FULL) will be 5th Aug, 2014.
Thanks sir.. Full EMI was debited from my account on July 1st.. I guess I should raise a service request to correct it..
Its a common problem due to internal mis-communication. You may register complaint with bank.
I am looking to buy a flat in project in pune. Builder is reputed in this area and have delivered other sites in the same area. For other sites he is saying that he is ready to wait for other banks like SBI and LIC but the project where i liked the flat [ready possession] , builder is saying that project is approved by HDFC and ICICI and we have to take loan only from these banks/HFC. When asked about this he is saying that he is not ready to wait for the processing from other banks. What would be your suggession on this should we go for these banks ?
I never suggest Home Loan from banks who pre-approve project. Please check my following post
https://www.nitinbhatia.in/home-loan/5-myths-about-pre-approved-project/
Hi Nitin, If I wish to go for a home loan from either of the two pre-approved “Banks” i.e Axis (Bank) OR LIC HFL (HFC), what would you suggest ? Is there any harm in getting funded by LIC HFL as they does not follow RBI norms. Please advise ?
I will prefer Axis Bank.
Thanks Nitin.
Hi Nitin, you had always advised buyers to undergo a complete legal verification of the project.
My builder had given me a host of files which i dont understand..
1. Can you pls suggest on the list of documents I shall demand from the builder..
2. Secondly, what are the approx charges from lawyer? I am not asking exact but as a end user, we do not goto lawyers frequently and have no idea of their charges.. lawyer consulting is not an exact science.. so i want to ensure that i dont overpay to lawyer.
3. I understand that the lawyer’s certificate will not guarantee the quality of the construction or will the deadlines be meet. .. but it will definitely help in knowing fi there awill be roadblocks to builder to continue construction in case the NOC is awaited
Dear Nitin,
any updates pls
All queries are answered within 2-3 days. Please have patience.
1. For general list, pls check following post
https://www.nitinbhatia.in/real-estate/property-document/
2. It vary from city to city
3. Thats correct
Hello Nitinji,
I have got loan approval from HDFC bank for 40lakhs. But i am in catch 22 situation right now.
My builder has pre-approved by BOI bank.
We have submitted all the documents to HDFC. Now HDFC is asking for NOC & Charge release letter from BOI. Is this legal requirement ?
If not how should we proceed with discussion with HDFC ? They are outright saying they need this document.
we contacted BOI , they are not ready to give noc. are they allowed to deny the request ?
Is it responsibility of Builder to provide noc from the BOI bank ?
appreciate your help.
Thanks,
Prem
It seems that the builder has mortgaged either land or project to the BOI. I concur with HDFC that NOC and Charge Release Letter is required. Even if you avail loan from BOI then also you should demand these 2 documents to avoid any future legal hassle.
It is builders responsibility to arrange these documents.
Dear Nitinji,
Thank you for the information. We spoke to builder now, he is blatantly denying that its his responsibility and saying BOI is not ready to give NOC. And he is stating that other banks like LIC are giving loans without NOC.
Now we don’t have any other option but discard HDFC and got to BOI for loan.
But i am in doubt how safe it is to go with bank who is tied with builder.
If the project is mortgaged then it is not safe.
Is there any way to know if a project is mortgaged or not?
There is no direct way. To check land mortgage, you may pull out encumbrance certificate from local sub registrar office.
Hello Nitin,
I recently booked a property, builder said he has pre-approved loan with SBI/HDFC/LIC. He showed his project approval details on SBI website. Builder saying the project is approved with SBI and can visit any branch across india. Can i believe SBI has verified all the documents and approved or any manipulation can occur here?
Should you still suggest to go for other banks which are not in builders approval list?
BR, Rakesh
Though SBI is 1st choice but you may approach ICICI Bank or Axis Bank.
Hi Nitin,
Your posts are always very informative and helpful for the middle class buyers like me. Thanks a million for that and please do continue the help in these difficult things.
I needed your suggestion. I Booked a 2BHK flat off bannerghatta road (Bangalore) and approached Corporation Bank for the loan. It is almost in the sanctioning stage. However I wanted to know since bank told me that they have legally verified this property there will not be any issue; Can I trust this and believe that the property is legally risk free. I got to know that nearly 15 flat owners in the same apartment have already taken loan from Corporation Bank. Please suggest me whether still i need to approach Lawyer for one more document verification or will Bank verification is enough?
PS: The apartment was ready to occupy from August 2014 onwards and 90% have already occupied. Builder has built 7 Residential/commercial properties before.
Thanks again,
Regards,
Murugan
As i always suggest that you cannot rely 100% on Bank. You may hire a property lawyer for title search report.
Hi Nitin,
Thanks for your informative posts. I have a question here with regard to pre-approved home loan.
1.Recently, I have visited a venture where the builder claimed he has approvals from all the leading banks & HFCs like-SBI/SBH/Andhra Bank/HDFC Bank/ICICI/DHFL/AXIS/India Bulls/LICHFL.Now if i have go for home loan which approach would be fine? Selecting any one of these banks or outside one?
2.In Either of the cases, which bank would you suggest for loan?
3.The project was started somewhere in Sept-2014. Since it is approximately 15 months ago, is the pre-approval still valid? or will the banks that have already pre-approved will check the docs for second time?
Please let me know. Thank You!
1. I think all leading players have approved the project. You may select SBI or ICICI Bank
2. Answered in point no 1
3. This is the risk i always highlight. You may check which bank has recently approved the project and when.
Sir, I have a question for you regarding Pre Approved bank Loan.
I bought a flat on 19th floor from a builder whose project has been approved by SBI. The project is of 23 floor. Till now I have made 20% of the payment as per slab (till 7th floor). Now they are on 8th slab.
I am planning to avail the loan, so I approached the bank.
Now bank says it cannot process the loan because builder has not got the permission for floors above 13th floor.
I am confused like what steps I need to take further?
First they say it is a pre-approved project. Now they are not processing home loan. (what exactly is happening?)
Is the bank right here? Can they not processes the home loan?..
As i have explained in my posts that home loan is guaranteed even for pre approved projects if the builder deviate from approved layout plan. In this case, builder has permission to construct only till 13th floor and all the floors above that are ILLEGAL. Therefore, You should confront the builder and buy any other flat till 13th floor or tell him to cancel your booking and refund the amount as 19th floor is illegal.
Sir, We have booked a flat with Rs. 25k as booking amount and today we have paid 10% of the flat value after showing our 90% pre-approved offer letter from DHFL. While processing the loan and giving the documents to DHFL they said that they already have got their project approved from them but today they said that they have given them the documents and will most probably get their project approved by the end of May’16 and as per the offer letter 30 days time is alloted to us for submission of the documents for disbursal. In this case what we should do as the builder has not got their project approved yet from them, Should we:
1. Stop the cheque and ask for the refund of the booking amount?
2. Should we wait for him to get the project approved and then re-apply in DHFL because this offer letter will then become invalid?
I am in a big dilemma and hence request you to provide your valuable advice.
Waiting for your reply.
1. You have not mentioned time given by the builder to pay. Also you can discuss with builder.
2. Offer letter can be extended by 3-6 months only once. You can submit written application with DHFL.
Hi Nitin,
I am planning to book a plot in a venture in Bangalore and it is approved by Axis, PnB housing and India bulls. I want to go with HDFC but builder is not showing interest and pushing me to go with PnB housing. I am confused will there be an issue. What are all the documents required before applying to non-approved bank? I can ask these documents and if the builder provides, will apply for HDFC.
You may go ahead with HDFC. HDFC will share the list of documents required by them.
I have booked a flat at Sipani Bliss II and found that the project is approved by SBI, LICHFL, ICICI, AXIS etc. Does the banks check legal documents before approving?
Do I need to check the legal documents again?
Banks do check legal documents but you should obtain title certificate independently. Title of the property is solely buyer’s responsibility.
Hello Sir,
I am buying one ready to move flat in Bangalore (Land owner share). Project is pre approved by HDFC and LIC. But we went through another bank PnB for house loan. Now PnB is asking for original documents but owner is not able to get it from builder and he is asking us to go for any approved bank or SBI. Since some people in same project have already taken loan from SBI so SBI will not see originals again that he said and SBI marketing consultant as well.
Please note project was not pre-approved by SBI.
Kindly please suggest shall I go for loan from SBI ?
One more doubt if SBI has seen originals sometime back around 5-6 months, now is there any possibility builder or owner can mortgage those original papers of land to any other bank without anyone knowledge?
Thanks in Advance for your opinion.
You may go ahead with SBI but you need to find out why the land owner cannot show original documents. It is very common practice in bangalore to mortgage the project or some flats after the project is pre-approved by banks.
Hello Sir,
I booked a site which is pre-approved by LIC Housing & DHFL banks. But i wanted to take loan from other banks and i applied for the same. After two days the bank executive told me that he cannot sanction me loan for that property and i should look for i should look for other property and if required he will help me too.
I asked him the reason for rejection and he simply told that the builder ranking is not good.
My question is 1. How can one reject a loan without checking property documents and what could be the reason behind this..? 2. I had personally verified the documents with a lawyer and found everything in order. Should i go ahead with LIC Housing..?
Kindly suggest,
Thank you in Advance,
Regards,
Sharan
The loan approval is solely at the discretion of the bank. I will prefer a home loan from SBI, ICICI Bank or Axis Bank. A bad builder ranking also imply that builder has not completed earlier projects, delay or some other issues.
What about HDFC Bank Home Loan?
HDFC Bank does not process home loan.
Hello sir,
I visited a project and the builder says it is pre-approved from SBI & Axis bank. But still, I am verifying the project papers with legal help from a lawyer. If lawyer finds everything OK with the project document, would be there a good chance to get Home loan approval?? Moreover the builder has also provided me the copy of the SBI’s lawyer’s complete report on the project approval. Is it ok to believe on such report??
If your lawyer issue clear title search report then you may go ahead.
What if I put an RTI question about the title of property in collector’s office?
Why do builders hesitate in forming CHS even after property occupied by minimum required members?
what is the reason that water electricity connections are harder in Grampnchayat areas?
What are the rights of a flat buyer in an grampanchayat area?
1. Collectors office cannot certify title. You may specific queries on approval etc.
2. If CHS is formed builder will have to pay maintenance charges to the society for unsold inventory. Normally they form CHS when 90% to 95% inventory is sold
3. If proper approvals are not in place then it is difficult to get water connection
4. Rights are same as any other property buyer subject to necessary approvals obtained by builder from concerned authorities.
I need a loan amount USD THREE Million for my real estate and agriculture business purpose, Loan duration 15 years but Loan should be without any upfront fee, Interested legit Lender can contact via email id- sriharidalai@gmail.com, maabasantidairyfarm@gmail.com
Hi Nitin,
If the project has been pre-approved by SBI and it also is listed in their online list of approved projects, then do you still suggest to go with a separate legal verification?
In my opinion YES.
Dear Sir,
while reading your this artical regarding 5 myths about pre-approved projects
My query is In case of any issue or dispute(i.e related to projects) occurs why bank catch borrower not builder ?
if the projects is pre approved by bank / HFC,
or Bank didn’t check project details or papers before approving projects ?
or Is there any law for this ?
Pre-Approved Project is Legally Safe:
Technically and legally, buyer is not eligible for Home Loan on such projects but bank which pre-approved the project was providing Home Loan easily. In such cases, banks don’t take any legal guarantee. In case of any issue/dispute, if you default then bank will catch hold of borrower not the builder.
The title of the property is borrowers responsibility not of bank. Please check my following post for more details
https://www.nitinbhatia.in/real-estate/property-title-search/
Hi
I made a booking in one of the apartments in Bangalore. Builder has permission for G+3 floors and he has built stilts parking and 4 floors above it. Its an already constructed project. When I checked with the builder he said parking is not counted as floor and G+3 is from 1st floor and their construction is as per the approved plan.
SBI has already approved the project and and is still giving HL but saying there is slight deviation so I should buy an insurance to get the Home Loan Approved.
Their numbering for flats is like
First Floor is 001, 002…
Flat I booked is 303 so comes under 4th Floor.
Now I am worried weather I should go ahead with registration or drop my plan.
Please suggest what should be right approach.
You may check complete details with SBI. Deviation is not a reason to sell insurance. Also check with BBMP whether OC is issued or not.
Hi
I have made a booking in a ready to move in project by Provident group. The title verification report from SBI lawyer says that the title is clean. The project had the commencement certificates and occupancy certificates and Khata certificate. Encumbrance certificates and conversion certificates are also there. Many people are already staying in the society. I have got home loan sanction from PNB Housing. The owners association is also formed. The entire piece of land is in the name of the builder and the unit they are selling me is part of their investor’s quota.
How should I proceed in this case?
Please share specific query. For general suggestions, please check my posts on real estate and home loan.