January 9, 2007: The Reserve Bank of India has become strict in the housing finance process and directed fresh guidelines to commercial banks attacking broadly on dealing with building violations and illegal properties.

Now the bank that has financed your house has the powers to recall the entire loan along with interest, costs and bank charges in case you violate the sanctioned plan.

From now onwards, an undertaking has to be given by the property owner/borrower stating that he/she shall not violate the sanctioned plan and construction will be strictly as per the plan.

This will be the task of the owner to attain completion certificate within three months of completion of construction work. In case this undertaking is not complied with, then the bank can recall your loan.

An applicant for housing loan for building construction has to submit a copy of the sanctioned plan by the competent authority in the name of the person applying for home loan.

The RBI has assigned this responsibility on the home loan bank to appoint an architect who will be inspecting at plan various stages of construction and ensuring that the construction is going as per the sanctioned plan.

While applying for housing loan for purchase of a constructed property, the borrower must declare that the building is as per the plan and the bank architect should also certify the building.

The banks have been asked not to finance those properties falling in the category of unauthorized colonies unless and until they are regularized, development and other charges are paid.

Taking stock of the large-scale violation of change of land use, the RBI has directed the banks not to release loans to properties meant for residential use but intended to be used for commercial purposes in future by the owner.