Central registry to verify that the property mortgage

 

Buyers and financial institutions are often duped 

by unscrupulous sellers and loan seekers by

concealing the mortgage related information of a property.

The properties that have been already funded by a bank 
are submitted afresh for loans by manipulating the documents. 

Buyers unaware of such frauds end up buying them only to find
that they have inherited liability. It is reported that the banks have
lost amounts of nearly Rs. 400 crore and the personal loss 
of the buyers have not yet been precisely calculated.





Such criminal practices may soon come to end and buying 
properties or seeking home loans would become reactively transparent.

The budget recently unveiled by the Union Government has proposed to
set up a Central Electronic Registry, data base of all properties
mortgaged to banks and HFCs (Home Finance Companies).
It will collect, collate the information of mortgages and circulate 
the same back to all banks and HFCs. When a bank/HFC processes
a home loan proposal, it will first verify with the central registry if the
title to the property is clear and the property is not already
mortgaged to any other Bank/HFC. 

This way multiple funding on one property can be

avoided and also fake documents detected.

This proposal has its own advantages over the 

registration of mortgages under the Transfer of 

property of Act of Property Act, 1882.

Normally, a mortgagor (borrower) deposits his or
her title deeds with mortgagee (lending institution)
as security for the loan availed. This is beneficial for 
both the borrowers and as well as lenders, since the
procedure followed is simple, convenient, less expensive
and less/no paper work is involved. A mere deposit of title 
deeds with an intention to create security is sufficient to 
affect the equitable mortgage.



As it is difficult to establish the intention to 
create security, many banks/HFCs insist on executing
a memorandum evidencing deposit of title deeds.

Once the deposit of title deeds is reduced in writing,

in many states, it attracts stamp duty varying 

between 0.25% and 0.5% of loan amount. 

While this may be convenient, the details of the
mortgage will not appear in the EC (Encumbrance Certificate) 
issued by Sub-Registrar or title search reports.


This information gap has been exploited . It is here that
the proposal to set up a central registry proves good. 
The registry will help Banks and HFCs to have beforehand 
information on mortgages created, if any, on the property
to be funded. The procedure to verify information on 
mortgages would be simple and economical .
But this is not sufficient.



The objective of setting up the proposed central agency
will be incomplete, until an ordinary citizen has access
to the central registry to verify that the property he or she
intends to buy is not already mortgaged and the property
is not being sold to him on fake documents.