Navigating Home Loans in Building Redevelopment: A Guide for Mumbai Homeowners
Ramana Iyer, a resident of Mumbai’s western suburbs, faced a significant challenge when his 40-year-old building proposed redevelopment. One member, with an outstanding home loan of ₹45 lakh, could not obtain a no-objection certificate (NOC) from the bank due to unpaid dues. This situation is not uncommon in older buildings, where the likelihood of homeowners having outstanding home loans is relatively low, but instances do arise, especially in 25–30-year-old properties.
In older buildings, the likelihood of homeowners having an outstanding home loan is relatively low. However, there may be instances in which apartments in 25–30-year-old buildings were purchased in the resale market with home loans. While some developers are willing to provide financial assistance to help such members settle their loans, many are reluctant to do so. Even when support is offered, other residents often raise objections or impose conditions, further delaying the redevelopment process.
Developers note that redevelopment is feasible even when home loans are pending in older buildings, but a series of procedural steps must be completed before the project can move forward in earnest. In case of old buildings, the chances of homeowners having a pending home loan are very thin; however, there are cases where homeowners may have purchased an apartment in the resale market after the building has completed 25-30 years, and have somehow managed to get a home loan. These are the cases where a home loan is pending, and there are chances of paperwork increasing due to the same, according to a developer not wishing to be named.
How does redevelopment move forward when a home loan is pending? According to developers, banks typically insist on full repayment of any outstanding home loan before redevelopment begins. This is because once a building is taken up for redevelopment and demolished, the underlying asset mortgaged to the bank ceases to exist, increasing the lender’s risk. When a building goes for redevelopment, and a member has an active home loan, banks usually demand that the loan be cleared. However, in some cases, redevelopment can proceed if the developer provides an undertaking and adequate comfort to the bank. Subject to certain preconditions agreed upon by the bank, developer, and housing society, the lender may then consider issuing a no-objection certificate (NOC),” said Vishal Ratanghayra, Founder and CEO, Platinum Corp.
In some cases, developers may end up pre-paying the initial corpus or the monthly rent compensation to the concerned member, who can then use these funds to clear their outstanding home loan. This is done primarily to expedite the process and avoid delays arising from non-payment or financial difficulties faced by the member, Ratanghayra added.
What is redevelopment? In Maharashtra, several old buildings, particularly those comprising two to seven storeys, are currently undergoing redevelopment. Redevelopment of housing projects involves demolishing the existing structure and replacing it with a modern, larger building, subject to various regulations. The residents of the old building receive larger apartments in the new building for free, while the builder sells a certain number of apartments in the new building at a profit in the open market. The government also earns revenue through stamp duty, registration fees, and other direct and indirect taxes.
As many as 44,277 apartments worth ₹1.30 lakh crore are expected to enter Mumbai’s real estate market through the redevelopment segment by 2030, according to a report by Knight Frank India released in September 2025. The free-sale component from society redevelopments is projected to generate around ₹7,830 crore in stamp duty and ₹6,525 crore in Goods and Services Tax (GST).
