Banks Seek SC Clarity on Loans Against Uncertified Ancestral Properties
20 Jan 2025
2 Min Read
CW Team
Several banks are gearing up to approach the Supreme Court to address a new hurdle in property-backed lending, The Economic Times reported on Friday. This move comes in response to a recent Supreme Court ruling prohibiting loans against properties lacking completion and occupancy certificates (CCs and OCs), which has raised concerns for situations involving older properties that often lack proper certifications.
Last month, the top court mandated that financial institutions can only sanction loans against properties if the borrowers present valid CCs and OCs. These certificates ensure that a building complies with safety, legal standards, and the approved construction plans. While the ruling aims to protect public interest by ensuring property safety and regulatory compliance, it has posed significant challenges for banks.
The ruling complicates lending against older buildings, ancestral properties, and heritage structures that typically do not have these certificates. Moreover, several Indian states do not issue OCs, adding to the issue. Given the importance of loans against property (LAP) as a financial product, banks are now seeking clarity from the Supreme Court on how to proceed.
Another concern is whether the ruling affects lending against properties under construction, as CCs and OCs are only issued upon project completion. Banks and non-banking financial companies (NBFCs) are awaiting a clear stance from the court to avoid potential legal ambiguities.
According to the report, some top private and state-owned banks have already escalated the issue to the Indian Banks鈥� Association for guidance. The industry is considering legal avenues, including filing applications with the Supreme Court to seek clarity or modifications to the ruling.
LAP has become a vital financial product, particularly for small and medium enterprises seeking business loans. For NBFCs, small-ticket LAP advances constitute over 60 per cent of their business loans, while for banks, LAP loans make up around 15-20 per cent of their home loan portfolios. These loans are preferred for their secured nature, especially in light of rising defaults in unsecured lending.
To comply with the new ruling, banks may require undertakings from borrowers and builders to provide the necessary certificates. Failure to furnish these documents could lead to loan recalls.
Several banks are gearing up to approach the Supreme Court to address a new hurdle in property-backed lending, The Economic Times reported on Friday. This move comes in response to a recent Supreme Court ruling prohibiting loans against properties lacking completion and occupancy certificates (CCs and OCs), which has raised concerns for situations involving older properties that often lack proper certifications.
Last month, the top court mandated that financial institutions can only sanction loans against properties if the borrowers present valid CCs and OCs. These certificates ensure that a building complies with safety, legal standards, and the approved construction plans. While the ruling aims to protect public interest by ensuring property safety and regulatory compliance, it has posed significant challenges for banks.
The ruling complicates lending against older buildings, ancestral properties, and heritage structures that typically do not have these certificates. Moreover, several Indian states do not issue OCs, adding to the issue. Given the importance of loans against property (LAP) as a financial product, banks are now seeking clarity from the Supreme Court on how to proceed.
Another concern is whether the ruling affects lending against properties under construction, as CCs and OCs are only issued upon project completion. Banks and non-banking financial companies (NBFCs) are awaiting a clear stance from the court to avoid potential legal ambiguities.
According to the report, some top private and state-owned banks have already escalated the issue to the Indian Banks鈥� Association for guidance. The industry is considering legal avenues, including filing applications with the Supreme Court to seek clarity or modifications to the ruling.
LAP has become a vital financial product, particularly for small and medium enterprises seeking business loans. For NBFCs, small-ticket LAP advances constitute over 60 per cent of their business loans, while for banks, LAP loans make up around 15-20 per cent of their home loan portfolios. These loans are preferred for their secured nature, especially in light of rising defaults in unsecured lending.
To comply with the new ruling, banks may require undertakings from borrowers and builders to provide the necessary certificates. Failure to furnish these documents could lead to loan recalls.
Next Story
Blum India brings Design Reverie to Hyderabad
Blum India hosted the Hyderabad edition of its signature event, Design Reverie, at the historic Taj Falaknuma Palace, making it a memorable evening for the city鈥檚 architecture and interior design community. As per news reports, the event combined modern design sensibilities with the grandeur of a palace setting and the spiritual charm of Sufi qawwali.This marked the third edition of the event, after previous gatherings in Delhi and Bangalore. In Hyderabad, the focus was on fostering relaxed yet meaningful dialogue among design professionals鈥攁way from the typical conference setup. The eveni..
Next Story
Hafele launches Platinum Studio in Nagpur
Hafele has expanded its franchise footprint in central India by opening a new Studio Partner Platinum showroom in Nagpur in collaboration with Onkar Furnitech. The studio was inaugurated by Nitin Gadkari, Minister of Road Transport and Highways, along with Padma Gupta, Director 鈥� HR & Customer Experience, Hafele South Asia.Located at Sarthak Plaza, South Ambazari Road, Laxmi Nagar, the showroom offers an immersive experience of Hafele鈥檚 wide-ranging interior and home solutions. Designed as a hands-on, real-life application space, the studio showcases Hafele鈥檚 full portfolio鈥攊ncludi..
Next Story
Truflo by Hindware wins GPTW honour again
Truflo by Hindware has been certified a Great Place to Work for the fourth consecutive year, reaffirming its commitment to a people-first culture. The certification was awarded by the Great Place to Work Institute following a rigorous evaluation of employee experience, leadership, culture, and HR practices.Known as India鈥檚 fastest-growing plastic pipes and fittings company, Truflo has focused on fostering an inclusive, innovative, and growth-driven work environment. The company prioritises employee well-being and professional development, creating a culture where people feel valued and empow..
