Don't lend to unauthorised realty projects, Karnataka govt tells banks

The finance department pointed out that banks have given loans to apartments and other residential projects that exceed permitted FAR among other violations

The state government has asked banks to “initiate corrective measures” to avoid financing realty projects that are unauthorised or have violated local building bye-laws.

The Finance Department, which reports to Chief Minister Basavaraj Bommai, has pointed out that banks have given loans to apartments and other residential projects that exceed the permitted Floor Area Ratio (FAR) among other violations.

The State Level Bankers Committee (SLBC) discussed this in its meeting Monday, but no decision was taken on the way forward, it is learnt.

Finance Secretary (Fiscal Reforms) Manju Prasannan Pillai’s letter to the SLBC was based on a petition made by the Association of Consulting Civil Engineers (India) Bangalore Centre to the chief secretary on banks lending to “unscrupulous, unauthorised and illegal layouts”.

Apparently, the Association found that banks sanctioned loans to at least 35 properties in the recent past. This was based on auction notices published in newspapers. “These were properties, financed by the banks, that defaulted on loans. Based on the site area and built-up area, we know what the FAR is and should be,” Association chairperson Shrikant S Channal told DH.

The Association listed details of various residential properties across Bengaluru. For example, the FAR of a residential building in Hoskerehalli was 3.45 against the permitted 1.75.

Besides exceeding FAR, many properties have been developed without obtaining technical approval from the competent authority, the Association stated. “DC conversion seems to be presumed by financiers as the approval for the development, which is in fact incorrect and is considered to be revenue sites,” it stated in its petition.

Building permits are another worry. “Apartment/building built on DC converted lands without appropriate building permit approval from the competent authority is another illegal activity. Many times the building permit is being given by the panchayats in the name of the panchayat president which is another illegal activity,” it argued.

According to Channal, many properties will start complying with building bye-laws if banks stop financing those that are illegal. “We did a recent survey of buildings in Rajarajeshwari Nagar, Basaveshwarnagar and Mahalakshmi Layout and found that over 95% of buildings violate rules,” he said.

SLBC convener A Muralikrishna, the Canara Bank general manager, said the issue is still under discussion. “The letter from the government has been shared with all the banks given the seriousness of the issue,” he said.