subject: CBI uncover Home Loan Scam [print this page] CBI uncover Home Loan Scam CBI uncover Home Loan Scam
It is clearly a season of scams in India. Starting from Commonwealth Games, theissue keeps moving from one potboiler to other. A friend of mine terms all these as Organised crime which I believe is a right term.
Now there is another scam busted by CBI-housing loan scam. The full details are not clear. Some public sector banks officials have been arrested for accepting bribes for clearing certain large loans. Markets crashed in the afternoon tracking the news of arrests of these officials.
This blog has been a huge critique of the housing market developments in India and Mumbai in particular.
I recently wroteon the role of banks in worsening the housing market corruption in India. Outcome of Navi Mumbai airport meanshome prices not just rise but corrupt practices increasefurther. As it is someone has to shell out close to 30-40% of black money to buy a house. Thiscomponent might just rise as both sellers/builders do not want to pay taxes or just transfer money to some other activity or both.
I am not one bit surprised by this scam. If one goes to buy a house in Mumbai one sees it everywhere. There are so many places where property papers etc are not clear but banks are seen funding the loans. Most brokers know bank people and once you pay off the black, arranging a loan is never a problem.
What is worse is that banks just ignore the market trends. All know the market rates but as around 30-40% of house money paid as black, give loans knowingly at 60% market price. So say seller quotes Rs 10000 per sq ft. The seller says 40% black. Hence on paper the value of house is shown at Rs 6000 per sq ft and loan asked accordingly. I mean don't the banks know the prices in the market? Why do they ignore this underpricing trends and just give loans so easily?
To make things worse, teaser rates were offered. So people threw away even the loan risks out of the window.
Banks can clean up a lot of things by refusing to finance any such deals. But they just don't. Most have jumped into home loan segment with fancy ads recently.
I am also hearing a lot of experts talk on TV and behaving as if they do not know anything. They all are showing they are shocked by this news. Don't they know of anyone buying a house in Mumbai/India?
People say you should be weary of stock markets when your driver starts giving tips on the same. On similar lines one should be weary of housing market developments when brokers tell you they can arrange for a home loan as they know the bankers!!
