What If Your Developer Defaults On His Loan

You may have done everything in your capacity to make sure that you invest with one of the best brands. But, as fate would have it, this real estate project got stuck in a limbo after the developers failed to comply with the terms of the agreement it signed with the lender. No sooner did you hear about the news than you, as a buyer who has used all his savings to book this flat apart from taking a big loan, started panicking. Are you going to lose your property because a legal tussle has broken out between the developer and his lender? Well, not necessarily.

What is about to unfold?

In case a developer defaults, the lender would first start proceedings known as symbolic possession. The drill is that the lender would stick a notice on the project informing the public about the default. However, this does not mean things have reached a point of no return for the developer. The defaulting party can approach the bank and settle the matter.  He could use his personal or corporate guarantee to maintain his ownership of the project. In the meantime, this promoter can continue the construction work and even hand it over to buyers.  However, in case the bank and the developer fail to come to terms, the lender would start the process to take physical possession of the property.

What now?

This lender, in all likelihood, does not mean to take down the structure. This would mean a severe beating to its profits. The most obvious choice that lies in front of the bank to recover its money is to sell the project to another player. The new developer or contractor will be serving the loan on different terms.

How does it impact you?

The change in the ownership of the project in no way fiddles with your ownership of a unit. The whole change in ownership, in fact, could only be an academic exercise as far as buyers are concerned ─ there would be some name changes. But, do make sure that you have completed all the paperwork to prove your ownership. Experts are of the belief that only having in your possession the builder-buyer agreement may not be enough. Buyers who have paid the stamp duty, the registration charges are better protected. In case you do not feel comfortable in the wake of the recent occurrences and want to sell this property, you have all the right to do so.