I have been faced with an issue where I have received a home loan approval from one of the bank. The bank had a tie up with builders in terms of making the loan process faster as they well acquinted with project outline, documentation & terms and conditions.
After approval of home loan the bank had disbursed full fund of 10 Lakh rupees to builder even though the construction of building not started at initial stage. The process normally referred as early disbursement of loan facility where full amount is being funded by bank to builder with leaving slight difference pending only for basic documents.
The EDF Facility when we enter in to doesn't give specific guarantee when builder will complete the construction process and give possession to customer and results in to Pre-EMI carrying only interest amount. (Doesn't cover principle amount till the time customer get possession of home). I got approval of loan in August and got possession May with paying huge interest amount sum of around 75, 000.
Again till the time the builder is not ready with final documentation up to Novermber 2010 and my total only interst amount goes up to 90, 000 Rs.
I wanted to hightlight here thought the EDF facility intend to provide flexibility to disburse fund early but results in to guarantee of completion of construction by builder. It autocreates unnecessory interest payment where bank shouldn't be allowed to have such tie up with builder.
There are few publict sector banks should be prohibited to have such tie up with builder about EDF facility where customer has to bear unnecessory interest payment.
Thanks
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