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Thursday, September 5, 2013

Do not sell homes to those people who can't afford to buy

Reserve Bank of India's (RBI's) Notification to All Scheduled Commercial Banks about 20:80 Schemes - a.k.a. - Advance Disbursement Facility (ADF) - No EMI (Pre-EMI) till Possession:

Reserve Bank Of India (RBI)
Reserve Bank Of India (RBI)

Collapsing Rupee, Collapsing Economy & RBI:

Yesterday outgoing Reserve Bank of India Governor D Subbarao did his last and best effort to save India from impending sub-prime crisis. RBI came out with a notification curbing 20:80 scheme.

Why RBI is aginst 20:80 scheme? Because, RBI knows the modus operandi of global financial firms - the criminal enterprises - which are on the verge of taking control of Indian Economy. To takeover any economy, these criminal enterprises have always crashed real estate market to trigger economic & financial crises.

You know how these criminal enterprises crash the real estate market? By selling homes to those who can not afford to buy! When these property buyers can not pay their EMIs, banking system collapses like a tower of cards and these sub-prime crisis trigger economic & financial crisis.

By this notification against 'Innovative Housing Loan Products' - upfront disbursal of housing loans - 20:80 Scheme - ADF - No EMI till Possession - RBI is trying to prevent the banks from selling homes to those people who can not afford to pay their EMIs and create the sub-prime crisis which will fully & finally collapse of Indian economy.

Builders & Politicians - Pimps of Global Financial Firms:

Last time, in the sub prime crisis of 2008 - world financial crisis - because of the strong RBI - Indian economy somehow managed to survive. But, now, in 2013, situation is different.

Indian rupee is collapsing. India's current account deficit - gap between import & export - is high. GDP growth has come down to 4 per cent. Government's spending on infrastructural development is not much. Government spending on ponzi social welfare schemes for the rural & poor people is high - which is not increasing productivity or GDP growth. but fueling inflation. Plus, now, Indian politicians & builders have become pimps of these criminal enterprises - global financial firms.

Today, Indian politicians, pimps of global financial firms, have already challenged the autonomy and accountability of Reserve Bank of India. The outgoing governor knows that if these pimps became successful in weakening the RBI, it would be difficult to avoid crash of Indian real estate market.

So, the only way to stop these global financial firms from creating sub-prime crisis is -
preventing their pimps - the builders - from selling homes to those people who can not afford to buy.

With this notification RBI insists on linking disbursement of home loan to stage of construction.
RBI says no 'innovative' housing loan products.
RBI says no 'No Pre-EMI till Possession' schemes.
RBI says no 'Pay Only 10% Now - Balance on Possesion' schemes.
RBI says book a home only if you can afford to pay Pre-EMI plus rent till you get the possession.

What say you?
Isn't the risk not limited to booking a flat?
Considering the current state of world economy,
do you think that you will remain employed for the next 20 years and would be able to pay EMI?
Please, share your views in the comments.

RBI's Notification:


What happens if a lender takes over a housing project?

Last month, the State Bank of India took over a housing project in Kolkata because the developer had defaulted on repayment of dues to the tune of Rs 176 crore. The Teen Kanya project was promoted by the Bengal Shelter Housing Development, a joint venture in which the state housing board has 49% stake. Therefore, its repossession by the SBI % has come as a shock for the 400-odd families that have invested in the project.

Most of the buyers had put money in the project because the state housing board was involved. The project is only half complete and the investors are now contemplating legal action to safeguard their investments.

The incident brings into focus the RBI's decision to stop builders from offering 80:20 schemes. Under these schemes, the buyer services only 20% of the loan for the property while the developer pays the interest on the balance till the property is ready. The RBI warned that if the developer defaults on the interest payment, the buyer would suffer because the loan was in his name.

What are the options available to a buyer if a lender repossesses a property due to default in payment? Legal experts and housing professionals contend that the lender does have first right over the project. Let us look at the issues involved. Read More

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1) Ravi Karandeekar's Most Popular Pune Real Estate Market News Blogs

2) RBI should have consulted before scraping 80:20: CREDAI

3) RBI’s move against 80:20 loans protects buyers in slowing economy

4) RBI diktat on 20:80 loan saves your credit score, money

5) India scrambles to reduce oil bill inflated by sinking rupee)

6) The liquidity crisis: Foreign banks play and the nation pays

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  1. Dear Mr. Karandeekar,

    Will this affect the latest launch of Palash Pirangut by Jawdekar Developers?

    With regards,

    1. Dear Milind, Has any bank officially agreed to finance the offer of Vilas Javdekar Developers' offer?

    2. Hi Milind,

      It will of course have an impact on "Pay only 10% scheme" : Vilas Javdekar Developers' offer

      Also, Ravi has a very good point mentioned above

    3. Dear Rohit, Is Vilas Javdekar Developers' offer really "Pay only 10% Now"? Means, do you really pay 10% to the bank as an own contribution?

    4. I think our RBI is clever enough to smell danger of sub-prime. The good motive of RBI behind this is to avoid sub-prime in India. We all know that why sub-prime bubble affected US and rest of world. Due to high property prices people were allowed to buy a flat with only 5-10% of actual amount of flat and because of that huge amount of loans were taken from bank with the little guarantee of whether it will be paid back. Similar conditions are happening in India now. Property prices went so high and now no one is able to afford the same. Infact prices in Pune are now out of reach of good paid IT folks. 50-60L for 2 BHK is insane price.

  2. This is very informative post. Thank you so much for Sharing.
    Odisha Real Estate

  3. This is a good move. I first heard of the ADF scheme when i went to the xrbia office in SB road and i was actually astonished !!. My first question to the salesgirl was "this looks funny." . So it looks like me and the head of the RBI were thinking alike :-) Atlease someone in this country's top leadership is thinking.

    If you buy something you cannot afford you would be forced to live the life in the company of mosquitoes and birds.

  4. Hi,
    Thanks for sharing this information.
    Even i am also in real estate business so would love to hear more from you on such information's. Property in India ,Real Estate India.
    Thank you

  5. Sir,

    Your blog has good information and the situation of the real estate market will be very challenging in the coming days.
    Dreamz Infra Reviews

  6. Hello sir,
    The real estate is a sector that has now become the most favored business option in any part of India.

    It is believed by the people here that property prices are changeable and so they always are very keen to invest in the real estate property on Projects in Dwarka Expressway , Residential Projects in Dwarka Expressway , Property in Dwarka Expressway , in