KATHMANDU: Kathmandu Metropolitan City has urged the banks and financial institutions not to sanction loan to the owners of houses or buildings by accepting their illegally built structures as guarantee or security.

Any house or building constructed without design approval as per the National Building Code, 1994 will be deemed illegal.

According to the metropolis, it has written to Nepal Rastra Bank, urging it not to approve loan to house owners unless they produce Construction Completion Certificate issued by the KMC.

“The banks and financial institutions should not approve loan against illegally constructed structures as guarantee without receiving the certificate to make sure that they have followed the building code and construction design,” the metropolis said, adding “The illegally constructed houses or buildings need to be demolished due to which loan issued against such structures by the banks and financial institution could be at risk.”

The banks and financial institutions were cautioned after learning that they were granting loans against the illegally built structures or those who have not received the certificate as security.  The houses or buildings constructed illegally without design approval are not eligible to get the certificate and will be demolished, and the concerned owners will face legal action as per the Local Self Governance Act, 1999, KMC warned.

It has also urged insurance companies not to insure the illegally constructed structures. Similarly, KMC has urged the District Land Revenue Office to stay away from transferring ownership of such houses or buildings, an official at the metropolis said.