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specified period. Borrowers have to be cautious because in the event of a developer delaying payment, the credit
bureau reports will reflect this in the borrower's records, thereby impacting his or her creditworthiness."
In September 2013, former RBI governor D Subbarao red-flagged 20:80 schemes, a few days before his
retirement. "Such housing loan products are likely to expose the banks, as well as their home loan borrowers, to
additional risks in case of disputes between individual borrowers and developers/builders, default/delayed
payment of interest/EMI by the developer/builder during the agreed period on behalf of the borrower, noncompletion of the project on time, etc," said the RBI note.
It also warned banks that any delayed payments by developers or builders on behalf of individual borrowers to
banks might lead to lower credit ratings or scores of such borrowers at credit information companies (CICs), as
information about servicing of loans gets regularly passed on to CICs. "In cases where bank loans are also
disbursed upfront on behalf of their individual borrowers in a lump-sum to builders/developers without any linkage
to stages of construction, banks run disproportionately higher exposures, with concomitant risks of diversion of
funds," added the note.
In its new avatar, the dice is not so heavily loaded in favour of the builder. The new schemes give an option as
mentioned at the outset. Now, there is no tripartite agreement. Instead, only developer and buyer are involved
and decide on the method of payment. It is important that buyers or investors take note of all these points before
taking a plunge.