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Builder sells mortgaged flats & asking them to pay to finance company
22-Feb-2023 (In Consumer Court Law)
We are in the process of buying a 2BHK flat from a builder in Bangalore. While document verification, we have come to know that all the flats in the specific apartment are financed by a private financing company and we have to get a NOC from them after entering the sale agreement. That private financing company is having the first charge on all the flats and maintain an escrow account. So, the builder is saying that all the money transactions from my side should be payable only through the escrow account of the finance company and NOC will be issued by their side once I am done with paying the total cost of the flat. Is this a common practice in the real estate industry, i mean selling mortgaged flats and asking the buyers to pay it to the financing companies and getting NOC from them in turn. Being a first time home buyer, I am worried and is this actually safe to proceed?
It is usual industry practice where a project may be funded/financed by a bank or finance company. It is also true that the entire project would normally be held as a charge by the company for the funding being done by them. As and when an apartment gets sold the normal practice is that particular flat will get released from the mortgage and NOC will be issued. I would suggest that a tripartite agreement be entered into with the builder and finance company during the sale agreement stage or in the alternative atleast a mention of the method of transaction and association of the builder with the finance company be mentioned in the agreement to protect your interest. Please ensure that you dont make payments to the finance company directly unless you have one of these in place.
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Adv. Ramakrishnan S.
Bangalore | 100+ Answers
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