Banks face collateral risk as 22-A flags hit properties

The Section 22-A restrictions are also creating risks for banks and other lenders, as properties flagged under the prohibited list can become difficult to register or mortgage.

“Lenders treat any property listed under Section 22-A as a non-marketable parcel because the underlying asset cannot be legally mortgaged,” D Harshavardhan Reddy, Founder and CEO, HRCS India Property MatchMakers Pvt Ltd, said. He said the issue could affect both fresh home loans and existing lending relationships.

“Banks are actively cancelling previously sanctioned home loans. Buyers who have already paid upfront token advances are left unable to complete registration, forcing them to legally chase builders or sellers for refunds,” Reddy claimed. The bigger concern, he said, is for loans that have already been disbursed.

“Lenders face structural security risks for existing active loans where the property was subsequently flagged under Section 22-A after the loan had already been disbursed,” he said.