"In view of the higher risks associated with such lump-sum disbursal of sanctioned housing loans and customer suitability issues, banks are advised that disbursal of housing loans sanctioned to individuals should be closely linked to the stages of construction of the housing project/houses...," an RBI notification said.
Upfront disbursal "should not be made in cases of incomplete/under-construction/green field housing projects," it said.
The notification follows the introduction by some banks of "innovative housing loan schemes" in association with developers/builders, where upfront disbursal of housing loans is made to builders without being linked to the various stages of construction.
The RBI said such home loan products are likely to expose banks and their borrowers to additional risks.
The risks include disputes between borrowers and builders; default and delayed payment of interest/EMI by the builder on behalf of the borrower, and non-completion of the project on time.