Home Loan: Make Sure Builder's Promise To Pay EMIs till Possession Is Mentioned in the Agreement
Moneylife Digital Team 12 January 2023
For those home-buyers who believe in oral promises of builders to pay equated monthly instalments (EMIs) on home loans till possession, here comes a shocker from the apex consumer forum. In a ruling, the National Consumer Disputes Redressal Commission (NCDRC) dismissed complaints filed by several home-buyers against Rajesh Lifespaces Pvt Ltd and Rajsanket Realty Ltd, the builder and developers and ICICI Bank Ltd about the builder paying EMIs till the possession of the flat is handed over to buyers. 
 
In an order combining seven complaints and issued earlier this month, the bench of justice Ram Surat Ram Maurya (presiding member) and Dr Inder Jit Singh (member) says, "Clause 9 of the sale agreement dated 17 August 2013, between the complainants and builders, mentioned that the promoters had entered into an agreement with ICICI Bank to promote subvention scheme popularly known as 20:80 for the benefit of their purchasers. It only means that the bank was ready to give a loan to the extent of 80% of the cost of the flat under the subvention scheme. It does not mean that the liability of the complainants to repay the loan or EMI was absolved till delivery of possession, as there was no such contract between the bank and the complainants. As such, the argument in this respect cannot be accepted."
 
One complainant, Akshay Gupta, had submitted two emails dated 23 July 2013 and 28 August 2013. In these emails, it was mentioned that "This loan is under developer subvention scheme for 36 months or possession, whichever is later."  
 
"In this sentence, it has been clearly mentioned that the loan is under the developer subvention scheme and not under any scheme of the bank. Similar sentence is incorporated in the agreement to sale between the complainants and the builder. The builders paid pre-EMI till April 2019. Under the facility agreement (standard format of the loan agreement) and undertaking, the complainants are bound to pay EMI if the builders stop payment," NCDRC says.
 
In this case, the complainants obtained a home loan and executed facility agreements. The bench observed that the buyers are liable to repay (loan) in accordance with the facility agreement, for which the complainants also executed an undertaking in which they took the liability to pay the EMI if the builder stopped payment of it. 
 
"Therefore, the complainants cannot deny the payment of EMI on the ground that under the sale agreement, the builders were liable to pay EMI till the date of delivery of the possession. Admittedly, the complainants withdrew from the sale agreement in 2018, therefore, there was no question of delivery of possession to them," it says.
 
The buyers have booked flats in Raj Infinia at Valnai in Borivali, Mumbai. Allured with the 'subvention scheme', the complainants applied and obtained home loans from ICICI Bank. The builders executed an agreement for sale on 17 August 2013, in favour of the complainants, stating in clause 9 that interest on the bank loan would be borne by the builder till the handover of the possession.
 
However, in an email on 30 May 2019, the builders informed the home-buyers that they cannot pay EMI due to their poor financial condition. On 13 July 2019, ICICI Bank issued a letter informing the buyers that an EMI of Rs312,070 was due for more than 60 days and asked the borrowers to pay this amount within seven days. Since the EMIs were not paid, on 19 September 2019, ICICI Bank issued loan recall notices to these borrowers. 
 
During the hearing, ICICI Bank submitted that it did not have any agreement with the developers for the promotion of the project. "The complainants directly approached the bank for sanction of the loan. The complainants were defaulters; therefore, the loan recall notice was issued on 19 September 2019."
 
NCDRC also clarified a circular issued by the Reserve Bank of India (RBI) on 3 September 2013. It says, "...it (RBI circular) is advisory in nature and will have prospective application. The loan of the complainants was already sanctioned and facility agreement, as well as undertaking, were executed on 21 August 2013. The circular will have no effect on it."
 
RBI had issued an advisory on 3 September 2013, and had asked all scheduled commercial banks that housing loans to individuals should be closely linked to the stages of construction of the housing project as the banks run disproportionately higher exposures with concomitant risks of diversion of funds under 80:20 or 75:25 schemes.  
 
(Consumer Case Nos63/172/174/175/177/255/67 of 2020  Date: 2 January 2023)
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