SBI loan guarantee isn’t the exceptional option

Under-construction properties are sincerely more low-cost than prepared-to-pass-in units, and that’s one reason why they were so popular amongst shoppers throughout the actual estate growth a decade in the past. However with growing cases of put off and defaults, shoppers’ confidence in beneath-creation houses has eroded.

A recent domestic loan product by means of the State Bank of India (SBI), Residential Builder Finance with client guarantee scheme, objectives to repair the self assurance by presenting to pay returned the most important borrowed in case the developer defaults. The concept sounds correct, but should you go for it?

SBI’s new loan product is more about the safeguards it has put in to ensure project completion than the guarantee it offers on the principal amount.

The bank only works with developers that have a track record of completing projects on time and are well-funded. “We will choose the builder we want to work with after evaluating it, based on different parameters,” said an SBI official, who spoke on the condition of anonymity because he is not authorized to talk to the media.

The bank will restrict itself to projects worth up to ₹400 crore in the affordable segment, which is clocking maximum sales currently.

SBI will also be the sole lender to the project it chooses for the loan product. The bank won’t allow the developer to raise any other loan for the project or even keep outstanding bills with sundry creditors like suppliers of cement, steel, and so on, beyond a few days.

All this allows SBI to have total control on the cash flows of the project and make sure that the project is on track. “This will ensure that no one else can initiate Insolvency and Bankruptcy Code (IBC) proceeding against the developer at the National Company Law Tribunal (NCLT),” said the official.

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