| Must ensure free access to citizens, writes R.P.Deshpande |
For transparency: More transparency required.
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.
(The author is a Director of Institute of Home Finance and can be contacted at deshpanderp2007@gmail.com.)
Source: The Hindu
Posts
