Buying a house is a cherished dream for everyone and Amit was no different. He was trying to buy a house for five years, but was not able to zero in on one as most were either beyond his budget or the location did not suit him. After a long hunt, he found a home which was perfect by all standards. He drew his savings and took a bank loan of Rs 40 lakh to buy the apartment.
As Amit was settling down in his newly done-up apartment, he got a shock when another financial institution sent him a notice mentioning that some Ravi had taken a loan of R30 lakh for the same property and has not paid his monthly installments for three months despite reminders. The bank threatened Amit that it would take possession of the house if the installments were not paid.
Well, as filmy this story might seem to you and you may even be reminded of the movie Khosla Ka Ghosla, I must tell you that on increasing number of such frauds are coming to light lately.
Thankfully, Amit’s travails are going to end with the finance minister in his Budget speech underlining setting up of a Central Electronic Registry under the Sarfaesi Act, 2002.
The registry will be operational from March 31 this year and the main objective will be to prevent loan cases involving multiple lending from different banks on the same property. In other words, people like Amit can heave a sigh of relief.
For potential home buyers, the registry will be of immense help and they can check if the property has a prior record of unresolved multiple lending from different banks. There are many lenders for a home loan like banks and non-banking financial institutions. The security against lending for your home is the home itself (read the title deed) ? and the assurance that the banks have is that should a borrower fail to repay his loan, they can take control of the property and sell it off.
In general, gaping holes exist in our land administration that are being misused by frauds. People give the original title deed to one bank, take a loan and then go and get another original made from the local land registration office ?a common reason cited while getting such copies made is that the document was stolen, misplaced or destroyed in fire. This new title deed is then used to get a second loan on the same property.
Even lending institutions have difficulty in cracking down such cases due to lack of adequate tracking mechanism and a comprehensive homeowner’s database. At present, there is no registry that can become a single point destination for anybody to search.
A fraud like the one which happened with Amit can be avoided, if the lenders have access to and can search an authentic database that would throw up complete details of the property, its existing lenders, if any, and the amount of the loan taken from a bank.
Even prospective buyers would be able to search the same database for a nominal fee and satisfy themselves.
Thus, before Amit goes ahead and seals the deal, he can be doubly sure that the home he is buying doesn’t have more than one landlord or if it has been involved in any legal scramble.
* The writer is managing director, iFAST Financial
