Subvention Home Loan – Default of EMI payments by Builders

The Supreme Court observed  about the hint of possible collusion between builders and banks arising out of blatant disregard of SC directions to furnish information roughly by 40 builders and 30 banks in the following factual background –

In the subvention scheme, buyer normally pays 5 to 20% as flat cost upfront and the builder pays EMI during subvention period.  The Banks disburses loan amount in instalments to the builder as per the construction progress.

In the instant petitions, the home buyers purchased the flats under subvention scheme.   As per tripartite agreement between home buyers, banks and the developers, the builders are to pay EMI till the date of possession.   The banks had disbursed 60-70% of loan amounts to the builders although project milestones are not achieved. Moreover, the developers defaulted in payment of EMI/pre-EMI payments.  The Banks demanded payments from home buyers.

One of the grievances of the home buyers was that the Banks disbursed loan without any due diligence to the builders and therefore, violation of 2013 RBI guidelines.

The SC, by the earlier order dated 5.11.2024, directed the banks, builders and the banks to furnish detailed information as per clauses (i) to (viii) mentioned in para 7 of the instant order.

This was complied with only by 9 banks and 5 builders and therefore, possible collusion was suspected.  In such circumstances, the SC considered that it may be necessary to constitute SIT to uncover nexus vide Order dated 4.3.2025.

Order dated 4.3.2025 of the Supreme Court of India in SLP [Civil] No.7649 of 2023 of Himanshu Singh and others   Vs. Union of India and others with connected matters.