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Finance to Real Estate
The builders and contractors normally require substantial funds for their projects which under normal circumstances raised by them by taking advance payment from the prospective buyers on whose behalf construction is under taken . Thus, if bank extend any financial assistance to them the same may result in dual financing. Bank shall, therefore, not consider any request for credit facility to this category of borrowers.
However, in case of small builders & contractors undertaking small construction work on their own and no advance payment is received by them for the purpose, bank may consider credit facility to them only to meet their Working Capital requirements against hypothecation of various types of unutilized construction materials, by way of Working Capital Term Loan and / or Cash Credit (Hyp.).
Obviously, bank shall not consider any fund based/non fund based facility to the builders/contractors for acquisition of land under any circumstances. Broad guidelines for sanction of credit facility to this sector are as under :- |
i. |
Eligibility |
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Any Individual, Group of Individuals, Proprietorship, Partnership Firms, Companies, who is/are a bonafide member of the bank. |
ii. |
Type of Facility |
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Working Capital Term Loan and /or Cash Credit (Hyp.) |
iii. |
Limit |
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Upto to maximum of Rs.25.00 Lacs subject to viability of the project and repaying capacity of the prospective borrower and also subject to minimum margin of 40 %. |
vi. |
Purpose |
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For meeting Working Capital requirement of the ‘Small Builders & Contractors’ whose annual turnover does not exceed Rs. 200.00 Lacs |
Other Conditions :-
a) Bank’s total Exposure under this scheme including individual Housing Loans and Commercial Real Estate shall not exceed 10% of bank’s total assets based on the audited balance sheet as of 31st March of preceding year.
However the ceiling of 10 % of total assets can be exceeded by an additional limit of 5 % of total assets for the purpose of housing loans to individual for purchase or construction of dwelling unit costing upto ` 10.00 Lacs.
b) Where land is accepted as Collateral Security for the propose credit facility, valuation of such land should be taken at the current market price only.
c) Bank shall not consider any credit facility, for acquiring/developing commercial Real Estate like Companies Buildings, Retail Space, Multi Purpose Commercial Premises, Multi Residential Buildings, Multi Tenanted Commercial Premises, Industrial or Ware House Space, Hotels.
d) No Credit facility under the scheme shall be considered or approved in principle by any of the branches without prior approval of Head Office.
e) All other usual terms & conditions and precautions as applicable to other credit facilities.
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