Loans have become more accessible these days as banks are facilitating equitable mortgage, wherein you can pledge your property documents with the bank and avail a loan. However, there are many bitter truths associated with equitable mortgage. It has a loophole that allows fraudsters to take multiple loans with the same property.
Instances abound where builders have pledged the entire property with banks to raise huge sums, only to disappear, leaving behind unfinished projects. Units in the project would have been sold to buyers, who take home loans for the same property. The banks of buyers are then unable to trace the loan taken by the builder with the first bank. As a result, buyers do not get the apartment registered in their name unless the builder clears his dues and the property is released from the first bank.
The banks that have offered loans to buyers are also left in the lurch as they are unable to get a hold on the property.
Drawbacks of equitable mortgage
Equitable mortgage is an easy method of obtaining a loan, but it has many loopholes that can be used to mislead banking institutions. The main disadvantage of equitable mortgage is that any charge created on the property due to equitable mortgage is not known to the public. This means, unlike a registered mortgage, there are no public records on equitable mortgages with bank or any other financial institution. This loophole is liable to be used to get loans on the same property from multiple banks.
The formation of a Central Registry
To put an end to such loan frauds, the central government has established a central registry of mortgages under chapter IV of SARFAESI (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest) Act. An agency known as the CERSAI (Central Registry of Securitisation Asset Reconstruction and Security Interest of India) has been in place from March 31, 2011.
CERSAI is a central agency that maintains records of equitable mortgages with all banks, making it impossible for anyone to take a second loan on the same property. All equitable mortgage information is made public so that banks and individuals can check the liability status of any plot or land by logging on to the CERSAI website.
Is mortgage registry with CERSAI must?
The Centre has made it compulsory for all banks, NBFCs and HFCs to register all their mortgage details with CERSAI, within 30 days of the mortgage. Whether this is being actually implemented in letter is a moot point.
On the downside, for loans taken before this initiative, the banks are not bound to share the mortgage details with CERSAI. The compulsory sharing of mortgage details is applicable to all loans facilitated after March 31, 2011.
What CERSAI means to you as a buyer
As a buyer, you can make use of CERSAI and safeguard yourself from any real estate fraud. You can check the mortgage details of any plot of land you intend to buy, to see if any mortgages are associated with it. The mortgage database is made public by CRESAI and you can verify the records of any property by visiting the CRESAI public search portal at http://www.cersai.org.in/CERSAI/JSP/IBACRPaymentGateway.jsp, by paying a nominal fee of Rs 50.
The formulation of the SARFAESI Act has meant that no one can take multiple loans on the same property.
Awareness of this facility would help all property buyers to stay away from real estate- and property-related frauds.
The writer is CEO, BankBazaar.com