Why Is It Difficult To Get A Loan On Grampanchayat Property?

While it is easier to get a loan within the city limits falling inMahanagarpalika, funding your house in grampanchayat for home loan in Mumbai becomes equally difficult for the home loan seekers. Mumbai is the city of dreams and is the home for cores of population. Over the period Mumbai has substantially widened geographically to cover its outskirts namely till Virar, Karjat/Kasara, Navi-Mumbai/New-Panvelin western, central & harbour to be called under the umbrella named “Mumbai”. The substantial part of these outskirts is typically still a village and therefore the ruling authority is still the grampanchayat for these areas.

Even though a property in grampanchayat costs half the price to a property within the palika limits, the grampanchayat properties still doesn’t remain the first preference for many. The main reason identified was the property funding. Most private & nationalized banks and NBFCs, do not lend fund for purchasing a grampanchayat property. And since majority of them don’t fund in grampanchayat, only a remaining handful of banks/NBFCs takes the monopoly to fund, charging explicitly high interest rates and processing charges. So why is it that the banks/NBFCs do not fund in grampanchayat? Why is it that difficult to get a loan on grampanchayat property? Our analysis has derived the following few reasons for the difficulties:

1) For any funding in grampanchayat the land has to be an NA land i.e. non-agricultural land and it is observed that many times the land doesn’t have an NA approval.

2) The ownership of the property land / project land is also not clear. At times there are many family owners to the same land and owing to disputes the property is into litigation.

3) The title & the 7/12 utara of the property remains unclear and at times untraceable.

4) At times the builder also does not possess the necessary permissions for developing the property.

5) The grampanchayat property is not among the approved projects of the banks, and therefore do not have an APF number. The builder does not have the required set of documents needed for the projects approvals with the banks.

6) Unsafe construction quality. Since the property costs minimum to maintain the profits margins the developer/builders make use of material which is not up-to par or substandard for constructing the project.This hinders the loan tenure of the borrower as the technical done during the loan process reports the minimum age of the property.

7) Many grampanchayat properties do not possess the proper papers towards OC-occupancy certificate & CC – commencement certificate/ completion certificate.

Key Highlights For Grampanchayat Housing Loan In Mumbai

• There is no best bank for home loan in grampanchayat property. The loan is provided by only a few Banks/NBFCs, generally by the local co-operative banks.
• The grampanchayat home loan rates in Mumbai are always higher generally in a range of 9% -14% p.a.
• The processing fees are also high which differs from bank to banks and are generally in the range of 1% – 3% of the loan amount.
• Thegrampanchayat properties & the grampanchayat home loan finance schemes usually cater to the lower middle class and middle class population.
• Since it caters tolower middle class and middle class population who are generally the small income earners, the lender Bank/NBFC has no stringent rules for financial documentation of the loan borrower. This means even a self-employed who have not filled the ITR or a salaried with cash income stand a chance to apply for a home loan.
• Loan against property is also possible on a grampanchayat property.
• Home loan transfer of the grampanchayat property is also possible.
• A loan borrower also gets the benefits of affordable housing scheme of Pradhan MantriAawasYojana.
• Grampanchayat properties have restrictions on its number of floors. A construction of only ground + 3 storey building is allowed in grampanchayat properties.
• However now a days the phase of grampanchayat properties is shifting. The builders now have started building the grampanchayat homes in complexes as well with good amenities such as garden, play grounds, gym, club house, swimming pools,etc.