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Mortgage registry to prevent home loan frauds


Banks can soon verify with a registry whether title to a property is clear

Easy check: Finding out the validity of documents may get simpler

Buyers and financial institutions are often duped by unscrupulous sellers and loan seekers by concealing the mortgage-related information of a property. Buildings that have been already funded by a bank are submitted afresh for loans by manipulating the documents. People unaware of such frauds end up buying them only to find that they have inherited a liability. It is reported that the banks have lost as much as Rs. 400 crore and the personal loss of the buyers have not yet been precisely calculated.

But such criminal practices may soon come to an end and buying property or seeking home loans may become transparent. The budget recently unveiled by the Union Government has proposed to set up a Central Electronic Registry, which will be a database of all property 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.

Avoid multiple funding

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 banks/HFC can avoid multiple funding on one property and can also detect if title deeds produced are fake.

This proposal has its own advantages over the registration of mortgages under the Transfer of Property Act, 1882.

Normally, a mortgagor (borrower) deposits his or her title deeds with the mortgagee (lending institution) as security for the loan taken. This is beneficial for both the borrower and as well as the lender, since the procedure followed is simple, convenient and inexpensive and little/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 put in writing, in many States, it attracts stamp duty varying between 0.25 and 0.5 per cent of the 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 by the criminally minded. It is here that the proposal to set up a central registry proves good. The registry will help banks/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 as compared to cumbersome procedures and heavy expenses involved in registered mortgages. But this is not sufficient. By allowing only lenders to have access to the central registry, it may help lenders and people who opt for home loans, but what about many others who may invest in property?

The objective of setting up the central agency will be incomplete, until an ordinary citizen has access to the registry to verify that the property he intends to buy is not already mortgaged and the property is not being sold to him on fake documents. Hope the Finance Ministry will safeguard the common man's interests while finalising the proposed Central Registry of Mortgages.

(The author is a Director of Institute of Home Finance and can be contacted at

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