MUMBAI – As the “Great Redevelopment Wave” continues to reshape the city’s skyline, thousands of homeowners in aging societies face a modern dilemma: Can a building be pulled down if the flats inside are still under a bank mortgage?
With over 160,000 buildings in Mumbai now eligible for a makeover, the intersection of old debt and new construction has become a primary talking point in society meetings from Borivali to Colaba. Recent market data suggests that while original owners of 40-year-old structures rarely carry debt, a significant number of “resale” buyers who entered these buildings in the last decade are still mid-way through their 20-year loan tenures.
The bank’s dilemma
For a bank, a home loan is secured against a physical asset. When a developer proposes to demolish that asset, the bank’s security effectively turns into a pile of debris. Under standard banking norms, a loan must be cleared before the property can be “released” for redevelopment. This has led to several projects hitting a temporary “roadblock” as individual members struggle to settle outstanding dues upfront.
Emerging solutions
However, real estate experts and developers note that an active loan is no longer a deal-breaker. Three main strategies are currently helping societies move forward:
- Developer assistance: Many Tier-1 developers are now offering to settle a member’s outstanding loan as an advance. This amount is later adjusted against the “corpus fund” (a cash benefit given to residents) or the monthly displacement rent.
- The Tripartite route: Large banks are increasingly open to three-way agreements. In this setup, the bank provides a No-Objection Certificate (NOC) for demolition on the legal guarantee that their claim will automatically transfer to the new, larger apartment once the building receives its occupation certificate.
- Bridge financing: Some financial institutions are introducing specific products that allow homeowners to transition their existing home loan into a “redevelopment loan”, maintaining the debt while the new home is under construction.
Impact on the market
According to a 2026 Knight Frank India report, redevelopment is expected to add over 44,000 new homes to the Mumbai market by 2030. Ensuring that “mortgaged members” don’t stall projects is critical for the city’s housing supply.
“In 2026, your old flat isn’t just a home; it’s a gold mine,” says a leading property consultant. “But for that gold mine to be realized, societies must ensure that legal and financial paperwork, especially bank NOCs, are handled with transparency early in the process”.
Also read – The changing face of Mumbai: From old factories to modern landmarks
Disclaimer – This article is for informational purposes only and does not constitute legal or financial advice. Readers should consult with professional advisors and their respective banks regarding specific redevelopment contracts.
Source – Hindustan Times
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