Jaypee homebuyers write to RBI and NHB seeking moratorium on their existing home loans

Homebuyers who had invested in embattled real estate group Jaypee have written to the Reserve Bank of India (RBI) governor and the chief executive officer of the National Housing Bank (NHB) seeking a moratorium on their existing home loans. They have said that EMIs should not be deducted until a resolution is hammered out on flat deliveries.

The letter says that the RBI has the powers to issue various directions to the banks under Section 21 and 35A of the Banking Regulations Act. These are statutory directions and as such binding on all the banks. Section 35A grants unlimited and unbridled powers to RBI to issue directions in the public interest and in the interest of the banking policy.

“The power would include the power to issue directions to the scheduled/commercial banks to keep the EMIs of the homebuyers in abeyance till the time there is clarity on the projects being developed by JAL and JIL or such necessary directions which would protect the interests of the homebuyers,” the letter says.

“…you are therefore requested to instruct banks not to raise any further demand for the time being and provide a moratorium on the EMIs and not to charge penal interest on the unpaid EMIs till the time possession or refund is granted to the homebuyers,” it says.

They have requested that the RBI instruct banks to collect the EMIs from the builder who had “the primary responsibility of completing the project within a period of 36 to 42 months.”

A copy of the Feb 20 Supreme Court order has been attached with the letter. The Supreme Court had directed real estate firm Supertech to deposit Rs 10 crore more with its registry to pay interest to the homebuyers who had opted out of its Emerald Towers project that has two 40-storey residential buildings in Noida. The court had also asked the real estate company to keep paying the EMIs on behalf of those homebuyers who have not opted out of its housing projects in question.

The letter to the RBI also said that non-payments of EMIs by homebuyers should not be treated as defaults but “only a necessary outcome of the peculiar circumstances and the present scenario.”

The letter notes that the banks had granted loans to homebuyers even before the projects were approved by competent authorities. “On filing of RTIs, it was discovered that several loans were issued by various banks even before the projects were sanctioned by the Noida Authority, which is a contravention of RBI/NHB regulations. It is noteworthy that in this entire gambit, the homebuyers are the ones who have been caught between the lenders and the builder. The homebuyers who were mere bystanders to this entire process, and who bonafidely paid each and every financial demand raised by the banks and the developer at all times duly performing their obligations under the contract, are the ones who have been most severely prejudiced and punished without any fault. It is well known that the property at present is non-existent and it seems very clear that the developer is unable to either develop or deliver the proposed project,” says the letter.

The letter says that the banks had offered various compelling but misleading financing options to the homebuyers to purchase flats in the project being developed by JIL/JAL. “Being enticed by such offers and misrepresentations, homebuyers booked flats/apartments in the said projects. However, after the failure of delivery of the flats, what seems apparent now is that the main reason for introducing such schemes by the banks in collusion with the developers was to provide easy access to funds at a low rate to the developers. One such scheme offered by the banks was the ‘subvention scheme’ which has been condemned by the RBI itself in one of its circulars,” the letter says.

In a separate letter to NHB, homebuyers have asked the apex financial institution for housing, that it should instruct housing finance companies not to raise any further demand for the time being and provide a moratorium on the EMIs and not to charge penal interest on the unpaid EMIs till the time possession or refund is granted to the homebuyers.

It also mentions that a similar request had been made to various banks in the first week of February but none of the banks had accepted the request and have “continued to issue demand notices even thereafter.” Banks had earlier said that they require the approval of NHB before agreeing to it, lest the loans are classified as non-performing assets.

Sriram Kalyanaraman, MD & CEO, NHB had told Moneycontrol, “We are looking at it from all aspects. Will an EMI waiver solve the issue at this point, we are not sure. We are looking at all the aspects because EMI waiver may have an impact on other sectors as well.”

Earlier last month, homebuyers had also written to the prime minister and finance minister, requesting that they should be spared from paying instalments to banks until their houses are handed over.