I am watching USMortgage scenario very closely for almost a year. What I understood andclear about one thing that the recession starting from USA and triggerpoint was US MORTGAGE.

US President also acknowledge this problem, at number of time and at different forum and meetings.

Whyit happened and why we should watch our real estate developer becausethe developer uses their customer to raise money from market by usingMortgage or Home Loan very effectively.

In India if adeveloper want to raise money from bank then they have to go forproject appraisal and have to provide extra collateral ( Property assecurity) and have to pay interest @15% per annum.

HomeLoan is liability of customer and not developer, Developer givediscount on property as Down payment discount or takes money onconstruction demand basis. The Customer pays money to bank as EMI orPre EMI.

Veryrecently I came across a new trend where developer looks for highnet-worth individual, who can borrow good sum of money. The developertake very less or no money and issue receipt on PDC. Further developerundertakes to pay EMI of Customer for a period of construction time.The developer further enters into a buy back agreement with customer topurchase property back at pre-decided rate.

What is the catch or problem with this exercise?

Developer issue few papers to banker (HFC) and they are as follows:

§ Builder Buyer Agreement

§ Permission to Mortgage

§ Tripartite agreement

§ Money receipt

Apartfrom these, Developer provides all photocopy of land documents andphotocopy of approvals and Maps for project approval form Home LoanBank or HFC.

In Permission to mortgage and TPA, the Developerpromises to Bank or Home Finance Company that they will not transferthe property without the permission of Bank or HFC.

See in this case, if developer go through tough time and do not pay the EMI, then who going to be loser.

Ifdeveloper stops his project then how bank going to recover the money.Will bank people run after the borrower or the developer?

Thereare so many questions and no body know the answer, but I can say onething that Indian Home Loan is also sitting on a Time Bomb and it canblow at any time.