A builder going missing doesn't cancel your home loan. According to reporting by Moneycontrol.com, borrowers can end up paying a bank for a flat that isn't being built.
The bank still expects its EMIs. So talk to the lender early, keep every paper safe, and file complaints without delay. Don't just stop paying, because your credit score will suffer.
Key takeaways
- Your loan agreement is with the bank, not with the builder.
- Stopping EMIs on your own can hurt your credit score.
- Write to the bank, and file a complaint with your state's RERA authority.
- Keep payment proofs, agreements and messages in one folder.
- Speak to a lawyer before you take any big step.
How an under-construction home loan works
Most loans for new flats are paid out in stages. The bank releases money to the builder as work moves ahead. You pay interest only on the amount released so far. This early payment is often called pre-EMI.
EMI means equated monthly instalment, the fixed amount you pay each month. Full EMIs usually begin once the whole loan has been released.
The loan contract is between you and the bank. The builder is a separate party. That's why the bank can ask for repayment even when work has stopped. It's also why you may pay for a flat you can't enter.
What it costs you: a simple example
Let's use made-up numbers to see the pattern. Say you took a ₹50 lakh loan at 9% a year. The bank has paid part of it to the builder. Monthly interest is the paid-out amount times 9%, divided by 12.
| Amount paid out to builder | Monthly interest at 9% |
|---|---|
| ₹10 lakh | ₹7,500 |
| ₹20 lakh | ₹15,000 |
| ₹30 lakh | ₹22,500 |
| ₹50 lakh | ₹37,500 |
These figures are interest only. A full EMI also repays some of the loan itself, so it's higher. You can test your own numbers with the EMI calculator.
Many buyers also pay rent while they wait. That makes the real monthly cost much bigger than the interest alone.
Who is affected
Buyers of under-construction flats are hit the most. Those whose banks have already paid out most of the loan face the biggest burden. Buyers of ready flats are far less exposed.
Co-borrowers and guarantors are affected too. If EMIs are missed, their credit records can also take a hit. Families who are waiting to move out of rented homes feel it every month.
If you're planning to buy, read our home loan guides first. They explain how payouts and EMIs work before you sign.
What to do now
A calm, step-by-step approach works best. Here's a simple checklist.
- Write to your bank. Explain that work has stopped and ask what options exist.
- Collect your builder-buyer agreement, receipts, bank statements and all messages.
- File a complaint with your state RERA authority. RERA is the real estate regulator.
- Think about joining other buyers in the same project. A group complaint often carries more weight.
- Consider a consumer commission case or a police complaint if you were cheated.
- Keep paying at least the interest if you can. Missed payments add penalties.
If money gets tight, ask your bank about a longer tenure or a short moratorium. A moratorium is a pause on repayment. The bank may say no, but it costs nothing to ask. Check the latest news in our news hub for related updates.
Frequently asked questions
Do I still have to pay my home loan if the builder runs away?
Yes. The loan is a contract between you and the bank. You should keep paying or work out a plan with the bank.
Can the bank take my money back from the builder?
Not on your behalf. You can file a RERA complaint to seek a refund with interest. The process can take time.
Will missing EMIs hurt my credit score?
Yes, it can. Late or missed payments are reported to credit bureaus. A low score makes future loans harder and costlier.
BankCreds analysis
The real damage here is not the interest. It's the double burden of rent plus EMI for a home you can't use.
Take a family paying ₹15,000 a month in pre-EMI interest and ₹20,000 in rent. That's ₹35,000 a month, or ₹4.2 lakh a year, with nothing to live in. The longer the delay, the more this cost eats into savings.
Who is worse off? Buyers whose bank paid out most of the loan early. Who is safer? Buyers whose payouts matched real construction work.
What this does not mean
It doesn't mean you can walk away from the loan. Nor does it mean the bank will cancel it. Recovery usually comes through RERA or courts, and that takes time. Plan your cash for a long wait, not a quick fix.
This section is BankCreds' own assessment of what the development means for Indian borrowers and savers. It is independent commentary, not part of the source reporting above.
Sources & references
- Moneycontrol.com — originating report https://www.moneycontrol.com/news/business/personal-finance/builder-absconds-home-loan-turns-into-a-burden-what-can-the-borrower-do-14052115.html
- Reserve Bank of India — banks lend under RBI rules, and borrowers can escalate complaints to RBI https://www.rbi.org.in/
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Editorial note & disclaimer
How this was reported. The development above is attributed to the source or sources listed. BankCreds does not independently verify a third party's reporting; where a figure or a regulatory position is stated as fact, it is either attributed or drawn from the regulator's own published material. Everything under "BankCreds analysis" is our own assessment.
Rates and figures. Interest rates, per-gram values and premium bands quoted here are indicative, move daily, and differ by borrower profile, city and lender policy. Confirm the final number with the institution before you act on it — the sanction letter or policy schedule governs, not a news report.
Not financial advice. This article is general information for an Indian audience. It is not investment, tax, credit or insurance advice, takes no account of your circumstances, and BankCreds is not a lender, broker, distributor or advisor. Consider speaking to a SEBI-registered investment adviser or a qualified professional before acting.
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