In a major policy decision, state housing minister Jitendra Awhad on Thursday said no loans should be passed by any bank or non-banking financial institutions (NBFCs) on the basis of letter of intent (LoI) given by the Slum Rehabilitation Authority (SRA) and the Maharashtra Housing and Area Development Authority (MHADA) for redevelopment projects.
Following a spree of meetings with housing department officials, Awhad told Free Press Journal, “The decision is important as it was found that developers have raised loans from banks and NBFCs based on the LoI.” He said loans cannot be given without any guarantee when the land is not a freehold land and entitled for loan. “It was also found in many cases that developers, after taking loans, left the projects halfway, creating hardships for tenants,” he said.
Awhad said the decision will curb project delays. “The department will decide on details pertaining to the guarantee on which developers can avail bank loans. However, it’s now clear that they cannot raise debt based merely on the LoI issued by the SRA and MHADA,” he noted.
A housing department official said, “In several cases it was found that the developers diverted the money, keeping the project development halfway. It has caused inordinate delays in project completion. A developer cannot mortgage land as it is given on lease for redevelopment. Therefore, banks and NBFCs have been asked not to provide loans based on LoI.” He added that there are nearly 550 SRA projects which have been delayed due to various reasons, including diversion of funds.