Banks, Lenders & Investors

How should diligence follow the proposed exposure?

A lender or investor should define the proposed transaction before commissioning a report. Construction finance, a secured facility, equity in a project vehicle and inventory purchase create different rights and information needs. Identify the borrower or investee, landowner, developer, security provider and entity receiving collections. A group brand does not show that the contracting entity holds the relevant assets or development rights.

Agree the intended users and reliance terms, information access, reporting date and excluded specialist work. Legal, financial and technical teams should use a common project boundary and transaction description. A title opinion for a buyer is not automatically a lender-security opinion, and a technical progress report is not a valuation. The client should know which decision each workstream informs.

Map the term sheet to conditions precedent, covenants, security, disbursement triggers and exit assumptions. If returns depend on future approvals, TDR or sales in another phase, make the dependency visible. A diligence exercise should not adopt the promoter’s model as verified simply because it is the only model supplied. Information limitations are findings that affect the decision, not administrative footnotes.

• Transfer of Property Act, 1882, Sections 7, 8 and 54 (transfer and sale)
• Registration Act, 1908, Sections 17 and 49 (registration and effect of non-registration)
• RERA Act, 2016, Section 4 (application for registration)

What should legal and technical review reconcile?

Connect title and development rights to the land, approvals and registered inventory. The legal team should identify qualifications, competing rights and the evidence needed to close them. The technical team should compare the proposed scheme and current site with the extent of sanctioned work. A commencement permission for one stage does not automatically support lending against all proposed construction.

Reconcile progress, remaining cost, approvals and project commitments within the agreed scope. A percentage without a reporting date and defined work scope is difficult to use as a disbursement condition. If information is inconsistent, explain whether the difference comes from timing, design change, missing evidence or error. Avoid forcing unrelated numbers into apparent agreement merely to complete a report.

Litigation checks should identify the actual entity, subject and operative order, not just count proceedings. Insolvency or secured-creditor action can affect available rights and remedies and requires separate analysis. A project may remain commercially attractive to the client despite identified risks, but that is the client’s informed decision with appropriate advice, not a conclusion supplied by a generic diligence score.

• RERA Act, 2016, Section 11 (functions and duties of promoter)
• Insolvency and Bankruptcy Code, 2016
• SARFAESI Act, 2002 and IBC, 2016 (where relevant to lenders)

How should account findings and closing conditions be reported?

Consider a proposed tranche supported by an earlier progress report and a recently revised design. The lender should know whether the old report still covers the work being financed. Ask the technical team to explain the changed scope and the legal team to identify any approval or security consequence. If the lender accepts a remaining risk, record that as the lender’s decision rather than changing the professional report to call the condition satisfied. The same distinction applies to an investor waiving a diligence condition: acceptance changes the transaction decision, not the underlying evidence.

Project-account review should start with Section 4(2)(l)(D) and applicable operational directions. MahaRERA Order 56/2024 distinguishes the designated separate account from a lender escrow and addresses control restrictions. A standard financing waterfall cannot be assumed to override those directions. Identify the applicable accounts and trace the actual receipts, transfers, certificates and use of funds.

Independent review should distinguish verified exceptions, unreconciled items, missing evidence and matters outside scope. A related-party payment may require investigation without automatically proving diversion. Consider independence where the proposed reviewer previously prepared the certificates being tested. The reporting professional must decide the appropriate assignment, evidence and level of assurance.

The final transaction report should identify satisfied conditions, items needing evidence before release and risks requiring the client’s express decision. Each closure needs a document and responsible person. Update material findings before closing or later tranches when facts change. Valuation, credit approval and investment recommendations are separate unless lawfully included. The services below do not promise capital protection, returns, enforceability in every circumstance or completion of the project.

• MahaRERA Order 56/2024, 27 June 2024: maintenance and operation of project bank accounts
• Chartered Accountants Act, 1949 and ICAI guidance on certificates