Rights of allottees not subservient to banks: HARERA
Financial institutions told to take prior approvals from the Authority before auctioning off real estate projects mortgaged by promotersUpdated: Sep 19, 2020, 01:28 IST
In an order aimed at safeguarding the interests of home buyers, the Haryana Real Estate Regulatory Authority (HARERA), Gurugram, has ordered that financial institutions, lending banks and creditors will have to take prior approvals from the Authority before initiating auction of a real estate project and while transferring the auctioned property to a new buyer.
Chairman of the Authority, KK Khandelwal, in an order, said that the rights of allottees were not subservient to banks. Therefore, if the banks fail to ensure that the funds are used for the purpose they are granted for, then the banks cannot be allowed to supersede the rights of the allottees.
He said that if it is found that any lending financial institution is engaged in auctioning real estate projects without the approval of the Authority, penal proceedings shall be initiated against the debtor promoter and the lending institutions. Such actions shall be demanded solely to protect the money invested by the allottees, who are not as powerful and resourceful as the builders and financial lender counterparts, he said.
Khandelwal said promoters often mortgaged their project land, structure as well as all receivables from the sold and unsold inventory to lending institutions and banks to get loans for funding the construction costs of projects. But when these promoters fail to repay the loans, the financial institutions directly auction residential or commercial properties that have been pledged with them to recover loans from borrowers by invoking the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002
“Such auctions invoke great anguish and distress to the allottees of the project as there is no acknowledgement of the huge investments made by the allottees into buying their dream home. The future of such allottees is in complete darkness and obscurity. Such aggrieved allottees are bound to languish for their own hard-earned money,” he said.