Over 5,000 middleclass buyers who have invested in Noida Extension are facing a deadlock with the Supreme Court’s verdict of returning land to farmers. They who got huge loans from banks in partly disbursed stage are now are forced to default.

In this scenario where banks could do none other than holding tight their norms to safe guard them, what can be solution for the buyers?

What Bank’s Say

Even though the banks failed to warn the buyers that that there could be problems with the projects, they are now forced to call those who fail to repay the loans as ‘defaulters’. Banks are standing stable on their view that they have the right to recover the amount that they have been paid as loan. Legally, buyers are liable to pay the pre-EMI or EMI to the bank as per the agreements with the bank. So unpaid loan accounts will only heap with interests and penal charges.

In this scenario, what bankers suggest is relocation to a new project of the same builder, which the builders too have already proposed. They also ensure that the buyers don't lose the interest amount in that case.

Choice for Buyers

For the bank’s suggestion, the buyers then would be completely at the mercy of the builder who would charge current rates and give no discounts for the new project. Either, they will have to bear the interest burden for the loan or agree with the terms of the builders for transferring to a new project.

Transferring loan to a new property of the same builder has no hassles, but the buyer needs to locate a property of matching the costs with that of the applied. The legal and technical specifications of the new property need bank’s approval. In that case, the same loan can be transferred to the new with no additional costs or charges.  An NOC or affidavit has to be obtained from the builder along with the documents of the new project and an undertaking / affidavit from the buyer also.

Else, the buyer can seek a refund from the builder, the money paid by him. The tripartite agreement between the buyer, bank and the builder permits a full refund of the amount paid in case the project is abandoned or called off.

But the interest they have already paid to the bank will not be refunded and it will be a huge amount as the initial instalments just recover the interest alone. 

Another option for buyers is that jointly they can submit a petition to the higher authorities of the bank to get holiday periods for the repayment till a decision is made. They can also go to the extend of seeking the mercy of the courts to negotiate the interest amount payable or filing cases against the developers for refund of they money invested to safeguard their money. As the builders are also facing huge losses, they won't refund the full amount.

Also, keep in mind that since there are a large number of people involved, banks are aware of the situation and some arrangement may be worked out.

Before any decision is taken in these situations, it is important to analyse the pros and cons of every decision, as well as consider all options available.

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