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CIBIL score: Do missed EMIs on delayed real estate projects affect your credit rating?
Missing an EMI due to possession delays can still hurt your CIBIL score, as credit bureaus record it as a default unless the lender intervenes, experts say
Rohit Singh, a 36-year-old mid-level IT professional in Pune, booked a 2-BHK flat in 2021 for ₹78 lakh, expecting possession by August 2023. To fund the purchase, he took a home loan of ₹65 lakh, with an EMI of ₹52,000 per month. However, due to regulatory delays and cash flow issues faced by the developer, the project stalled, and handover was pushed indefinitely.
Singh was forced to continue living in a rented apartment, paying ₹27,000 in monthly rent in addition to the EMI. With no tax benefits from possession and no rental income, the ₹79,000 monthly outgo severely strained his finances. His savings quickly depleted, and he began defaulting on utility bills and pausing SIPs and insurance premiums.
Within five months, he delayed two EMI payments, which impacted his credit score and triggered penalty interest from the bank.
“Borrowers facing delayed flat possession are caught between a rock and a hard place as they need to pay EMI as well as in many cases rent for the existing accommodation,” says Abhishek Kumar, a Securities and Exchange Board of India (Sebi)-registered investment advisor (RIA), and founder and chief investment advisor of SahajMoney, a financial planning firm.
Impact on home loan borrowers
Even if there is a delay in possession, it is recommended that borrowers keep on making the EMI payments on time. Starting from affecting your credit score, not paying your EMIs will land you in all sorts of trouble.
Banks will simply check which customer’s EMI has bounced. They are not obligated nor do they have the systems in place to check why it bounced. “So, yes, if you miss an EMI because your house hasn’t been delivered yet and you’re stuck paying both rent and loan, your CIBIL score will still take a hit,” says Siddarth Jain, CFO at MinEmi, a web application that utilizes AI to help users optimize their loan and credit card choices.
At present, there is limited formal relief available for borrowers in such situations. Lenders generally assess defaults on a case-by-case basis, and any relaxation or restructuring is at their discretion. “Credit bureaus rely solely on the data provided by lenders; they do not investigate the reasons behind defaults. As a result, even if the default is due to a delay in possession, it is recorded as a missed payment unless the lender intervenes,” says Raoul Kapoor, Co-CEO, Andromeda Sales and Distribution, a loan distribution company.
Any default, regardless of the reason, is recorded in the borrower’s credit history and can lead to a significant drop in the credit score. This, in turn, reduces the borrower’s chances of getting future loans or may result in higher interest rates.
“Rebuilding a damaged credit score is a slow process and may take years of consistent repayment and financial discipline to recover,” says Kapoor.
What can you do to minimise the impact
If you’re stuck with delayed possession, ask your bank if they offer a pre-EMI option. Under this structure, you only pay the interest portion of your loan until you actually get possession. “This significantly lowers your monthly outgo for a while. It’s similar to how an education loan works, interest accumulates while you study, and full repayment begins once you graduate. For homebuyers, this can ease the pressure during the construction phase,” says Adhil Shetty, CEO, BankBazaar.com, a fintech portal.
Lenders are often open to negotiations. If you explain your situation, say, construction is delayed and you’re struggling to manage rent and EMI, they might offer a moratorium. “For example, they could allow you to defer payments for six months, with the accumulated interest added later. It’s not free money, but it gives you breathing space. Many borrowers are unaware that such arrangements are possible if they simply ask,” says Shetty.
Anagh Pal is a personal finance expert who writes on real estate, tax, insurance, mutual funds and other topics
Early and transparent communication with the lender is thus crucial to negotiate suitable terms. Of course, one needs to remember that under these options you may get a temporary relief but the total cost of the loan increases.
