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House of cards

House of cards
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The Supertech fiasco in Noida has not only left about 250 home buyers in lurch but also shaken the confidence of investors in their most trusted benchmarks for buying property — ‘financed by a reputed bank’ and ‘loan facility available’. Yes, the bank guarantee were so far the most trusted benchmarks for home-buyers and investors in booming real estate markets of Noida, Greater Noida and Ghaziabad but not anymore.

‘I had booked my flat with confidence depending on the fact that the project was financed by a reputed bank. But I feel cheated as even after seven years I don’t know the fate of my investment. I am paying installment regularly but have got nothing,’ said V K Arora, who had booked a four BHK flat with Rs 98 lakh in 40-storey Emerald Court project of Supertech in Sector 93 A. It’s not an isolated case of only Supertech but the home-buyers in the area are facing similar problems with well-known real estate companies or local builders. The banks as per their rules have a two tier of scrutiny — legal and technical report, and rope in the services of experts to verify the documents of the property that too at the cost of the buyer. The government banks have a panel of local advocates to verify legal and personnel for technical veracity while most of the private banks like DHFL, and India Bulls have hired firms for the purpose. These firms charge Rs 5,000-Rs 8,000 for verification of property documents.

‘We will charge you 5 percent of the loan amount you require and fetch you the loan,’ said Mohit Aggarwal, a builder in the area claiming access (jugad) in some banks.
 ‘You can’t get loan without pay back. When you pay all the deficiencies of the documents are managed,’ he claimed.

The occupants living in his newly constructed apartment in Indirapuram agreed to pay the five percent commission to the agents to get the loan. The small builders in Noida Extension claim that the giant real estate companies have management to management nexus with banks as they need huge amounts to finance their project. ‘It’s a nexus of builders, banks and authorities. The officers of the authority approve the papers of the project presented by builders, banks accept it for finance and builders sell it to the buyers,’ said Shweta Bharti of Noida Extension Flat Owners & Members Association (NEFOMA).

Interestingly, in this entire process only the main stakeholder- the buyer, is at the receiving end as all other reap benefits. A builder starts getting money the day the buyer books the flat as he charges a minimum 10 percent as booking amount in addition to several other charges. The builder then produces these papers to the concerned banks for sanction of the loan amount and banks, instead, link the payment plan with the various stages of the construction of the project. As the construction begins, the builder starts getting money from the bank as per the payment plan and simultaneously the buyer starts paying EMI.

If the construction goes as per the plan, the builder gets entire money from the bank on completion of the project but the buyer has no escape route if construction is delayed. ‘It’s a complete mess. Once you are stuck you can’t escape. The builders — whether big or small, promise possession within one to two years but they always keep you waiting for five to six years citing one reason after another,’ said Rajnish Singh, who had booked a flat in Noida Extension.

‘The insurance companies never come to bail us out. They say the insurance of home loan is only for destruction of building in natural calamities like earth quakes or death of the main borrower. It’s not protected against any demolition action by the concerned authority,’ said Amrinder Singh, another buyer in Supertech. The nexus of bank and builder to trap buyers works even for local builders with small projects.

‘If you have all the papers complete, your loan will be sanctioned by paying 2-3 percent of the amount. But if the builder doesn’t have approval from the concerned authorities we charge 10 percent of the loan amount,’ said Ravi Sinha, a bank loan agent who also runs his consultancy RLC Finance Ltd. He also claimed that he has links in all the concerned departments and has assured bank loans even for the colonies which are not approved by authorities.

 ‘The banks need documents signed by junior engineers with their stamp and we can get it by pay backs,’ he claimed, showing the names of his clients who had secured loan in a similar fashion.

As government agencies (authorities) hardly take action against the occupied buildings constructed on private land, this illegal business is being nurtured with the help of a dominating builder-bank-authority nexus. The bank never loses its investment as flats or buildings are always mortgaged with them and secondly they have a guarantor to pay in case the main borrower is not able to pay up.
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