The diligence of several banks is under question after it has been found that Shiv Kala Charms, a Noida-based developer, sold same apartments to multiple buyers and financial institutions provided loans to two or more buyers for the same house.<br /><br />

The diligence of several banks is under question after it has been found that Shiv Kala Charms, a Noida-based developer,sold same apartments to multiple buyers and financial institutions provided loans to two or more buyers for the same house.

According to a report in The Hindustan Times, Shiv Kala Charms allegedly ripped off more than 400 people, defrauding them of amounts ranging from Rs 25 lakh to Rs 35 lakh.

Banks such as Axis Bank, Oriental Bank of Commerce and Syndicate Bank and housing finance companies such as HDFC, LIC Housing Finance Ltd (LICHFL), Dewan Housing Finance Corporation Ltd (DHFL), Punjab National Bank Housing Finance and Indiabulls are reported to have granted overlapping mortgages on these flats.

According to the report, the financial institutionshave initiated recovery proceedings against buyers in the Shiv Kala Charms project who have defaulted on EMI payments and cases of cheques bouncing have been registered against many of them but no action has been taken against the developer.

The housing scam first came to light over 2 years ago on 31 August 2011 when HDFC Bank published a list of 78 apartments in Shiv Kala Charms, stating that these were legally mortgaged to the bank. Buyers were shocked to find their apartment numbers listed by banks with which they had no dealings. Following this,other financial institutions that had approved loans for the same flats also came out with their own lists, revealing multiple duplicate sales and loans.

Victims have registered several FIRs in police stations while PILs have been filed in the Delhi and Allahabad High Court but the investigations have headed no where. ( Read the full story here)

The above case clearly highlights the housing finance companies' (HFCs) callousness while approving loans to individual buyers. The Campa Cola incident is too a case in point. According to several residents, various private sector banks had approved loans for the flats in the posh Worli compound even though the buildings did not have an occupation certificate or aconveyance deed. Technically banks are supposed to do a thorough due diligence and will not sanction a loan for a property that is under dispute or lacks the necessary approvals and documents.

Controversies like these is bringing to the fore the need to regulate builders more stringently and also to scrutinise the banking sector's exposure to the real estate sector.

More often than not floors in a building have been declared illegal after construction, or the builder has got into financial troubles because of which projects have been delayed or abandoned. In such circumstances, banks that sanction the housing loan will chase the customer and not the builder. These loopholes can be plugged by a few disclosures and changes to law.