Banks are now treading cautiously on sanctioning new home loans and advances for purchase of commercial properties following a spree of demolitions of homes and business establishments by the Hyderabad Disaster Response and Asset Protection Agency (HYDRAA) in the last one month.

There has also been a special focus to look into legal aspects in the event of already sanctioned loans turning into Non-Performing Assets (NPAs)

The Chief Minister A Revanth Reddy has constituted HYDRAA under his chairmanship with the main purpose of taking measures for preparedness and prevention of urban disasters. It has also been empowered to demolish illegal structures that came up on the encroachments of numerous tanks which are in the range of Full Tank Level (FTL). 

The demolitions which started with a mega convention hall owned by popular film actor Akkineni Nagarjuan about a month ago have been continuing in various areas in around Hyderabad city including in the FTL areas of at Appa Cheruvu, Ameenpur lake, Sunnam Cheruvu in Madhapur, and Katwa lake in Dundigal, Ameenpur and Patelguda and also along the Musi river. 

Though a final figure on land recovered till date is not available, demolitions as on date is yet to be given, official sources peg it around 100 acres. The demolitions also included commercial/business workshops, residential villas and apartment complexes. 

DILEMMA

As Hyderabad is a booming real estate market, banks provide a significant chunk of home loans and commercial loans as part of their retail portfolio in the Hyderabad urban area. 

``Many properties demolished by HYDRAA, if they have mortgages on them, are legally approved assets on which loans have been advanced by banks. Legally, if EMIs are not paid, banks can seize the property and recover dues by way of auctioning. But banks cannot auction government land after demolition of the properties. Even after demolition, the liability rests on the customers to repay the bank loans failing which criminal action can be taken by the banks,’‘ said an official of the State Level Bankers’ Committee (SLBC) told businessline. . 

NEW HOME LOANS

Major banks are also tightening legal scrutiny of new home loans applications. “We have been asked to be more cautious in legal due diligence of new applications to avoid any issues later,” P Trimurthulu, a legal consultant for a major public sector bank said. 

In fact, bank branches in some `select’ locations have also been advised to go slow on processing of new loans requests by the senior management, it is learnt. 

From its side, senior officials of HYDRAA are also planning to organise a meeting with the bankers and explain them the current situation and to advise them on the precautions to be taken while sanctioning loans.

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