India Tier 2, Tier 3 cities see surge in home loans

Most housing finance companies find that 60-80 per cent of the sanctioned home loans are to borrowers from these cities.

By H.P. Ranina

Published: Sat 10 Sep 2022, 6:08 PM

With interest rates going up in India, banks and financial institutions may be finding it difficult to give home loans to genuine borrowers. This would also have an impact on builders who have completed their housing projects and are unable to sell the stock on hand. Is my assessment of the situation correct?

It is true that there are not enough applications for home loans in large cities where the price of property has remained high. However, demand for home loans has increased substantially in the last few months from buyers in Tier 2 and Tier 3 cities due to more and more medium and small scale industries coming up in these areas. Most housing finance companies find that 60-80 per cent of the sanctioned home loans are to borrowers from these cities. The recent hike in interest rates has not dampened the sentiment of home buyers in these cities because houses are available there at extremely affordable prices. The new trend of working from home has also boosted the demand for housing in these cities.

My firm has been exporting goods and merchandise to India for the past several years. Some Indian importers who have defaulted in paying their loans to banks are facing the problem of their imported goods being seized and sold by the Customs authorities as the customs duty has not been paid by the Indian importer. Is this action legally valid?

The Customs authorities would be justified in seizing and selling the imported goods if customs duty has not been paid. However, if the Indian importer is subject to proceedings under the Insolvency & Bankruptcy Code (IBC), the customs department cannot sell the goods of the importer for realization of the unpaid duty. This issue has now been settled by a recent decision of the Supreme Court of India in a case where the customs authorities sold the goods belonging to the importer who had defaulted in paying the customs duty on imported goods. The Supreme Court held that this is not legally permissible. The Court held that the provisions of the IBC would prevail over those of the Customs Act to the extent that once the moratorium is imposed under the relevant provisions of the IBC, the customs authorities would only have a limited jurisdiction to assess and determine the quantum of customs duty and other dues. The customs authorities would not have the power to initiate recovery of dues by way of sale or confiscation under the Customs Act. Therefore, any action taken by way of sale or confiscation is invalid in law while proceedings under IBC are pending..

One of the major problems faced by both Indians and foreigners is the slow justice delivery system. Thousands of cases are pending for several years with no prospects of being heard in the near future. Is anything being done to remedy the situation?

There are about 6 million cases which are pending before the High Courts of India. One of the major issues is to fill up vacancies in various High Courts. About 220 Judges have been appointed in various High Courts in the last sixteen months. The new Chief Justice of India who took charge last month has taken serious note of this issue and on the very first day of his presiding over the Supreme Court, more than 900 miscellaneous applications were fixed before fifteen benches of the Court. During the month of September, the Supreme Court Judges will sit for extended hours on Mondays and Fridays to clear the backlog of miscellaneous petitions. Several steps are being taken to expedite the disposal of cases. The present Chief Justice is also keen to spread legal awareness and provide legal aid to the poor and underprivileged sections of society. He has launched the Legal Aid Defence Counsel system in 365 districts in 22 States of India. Therefore, efforts are being made to bring down the pendency of legal cases but it is a daunting task which will need to be tackled seriously over the next five years.

H. P. Ranina is a practicing lawyer, specialising in tax and exchange management laws of India. Views expressed are his own and do not reflect the newspaper’s policy.

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