Housing loans: Bankers in catch-22 situation - Deccan Herald

Housing loans: Bankers in catch-22 situation

Banks have been experiencing some problems while offering loans to sites falling within the CMC and TMC areas around Bangalore. K SUKUMARAN traces the origin of the problem.


The first signs of tackling the housing problems in Bangalore can be traced back to the 1950s. The housing colony in Jayanagar, which was perhaps the first of a series of housing layouts, came up with the vision of those who headed the then City Improvement Trust Board (CITB), Bangalore. Many may not believe that the sites of 40 feet x 60 feet dimension was allotted for Rs 400 in the Jayanagar first block during the year 1956-57.

When the CITB was later converted as the Bangalore Development Authority (BDA), the formation of layouts got a further phillip. The BDA was very active in the 1960s and 1970s, but for some reason or the other, the initiative for developing housing lay outs was later left to housing societies of members belonging to public/ employees of institutions.

Private developers from Mumbai snatched the initiative in the eighties. The rest of the story of modern developers who have, of course, changed the skyline of Bangalore, is now known to everyone. Well, whatever has lead to the massive development to meet the growing needs of this ever growing city, due to many reasons, the development also shifted from within the city limits to village panchayats and city municipalities.

Housing in CMCs

It is seen that village panchayats around Bangalore were converted into NACs in 1993. The NACs were converted into CMCs in the year 1996. The title to the converted lands in village panchayats as layouts were created through holder khathas by way of Government Circular issued on November 19, 1996.

It is subsequently found that these holder khatas were misused by owners and some developers, leading to unoraganised growth in the now existing seven CMCs and Kengeri TMC. These authorities, in fact, has no planning powers, which rests with the BDA/BMRDA. They have also no machinery to control unscientific growth. However, they feel the pressure for providing civic amenities.

Present Scenario

The holder khatha system has been withdrawn by the State Government by an order dated May 29, 2003, apparently to regulate growth and development. However, sale transaction of sites developed by private developers are still taking place. Registration of such transactions continue to be done in the sub-registrar’s office. After the introduction of Self Assessment System, property taxes are paid by the purchasers / transferees. Consequently, Form 111 are made available, though it does not give any ownership title.

Bankers' Dilemma

Purchasers/Transferees continue to approach bankers for housing loans. Bankers feel that there can be fake licences purported to have been issued by the ULBs (Urban Local Bodies) in circulation. It is likely that banks have been sanctioning housing loans on the basis of such licences. Bankers are vary at this development as they fear ‘a la stamp paper’ scam hiding in these licence problem. This surmise may have substance, as the Reserve Bank has very recently cautioned the Banks against possible frauds in the area of housing finance, and advised them to take steps to avoid such possibilities.

Suggestions

Bankers have suggested that a mechanism to verify the issue and genuineness of building licences is required to be put in place. Either the building licences produced for obtaining loans be referred to the ULBs for verification or the ULBs may send list of licences issued, to the banks. Another safety measure can be to post the building licences issued by the ULBs be notified in website.

Whatever be the action suggested, there is a need for proper system to control the growth in housing systematically and ensure that there is no lacuna in the title documents given to the financing banks, to avoid frauds and litigations in the future. The issues involved need to be addressed urgently before any large scale scam takes place.