Now, the focus of the bank’s activities shifts from you to the property you intend to buy. Once you select your property, you need to hand over the entire set of original documents pertaining to your property to the bank so that it can keep them as security for the loan amount given to you. These normally include:
- The title documents of your seller, which prove the seller’s title including the chain of title documents if he is not the first owner.
- NOCs from the legal owners such as cooperative housing societies, statutory development authorities, the lessor of the land in the case of lease hold land, etc. NOCs are not required where the property is situated on freehold land and the entire land is being transferred along with the structure.
- These documents remain in the bank’s custody until the loan is fully repaid.
Every bank conducts a legal check on your documents to validate their authenticity. Even the draft sale documents that you will be entering into with your seller will be scrutinized.
The documents are sent to a lawyer in their panel (either in‐house or outsourced) for a thorough scrutiny. The lawyer’s report either gives a go‐ahead if documents are clear, or it may ask for a further set of documents. In the latter case, you are expected to hand over the additional documents to the bank for a clear title.
So, if a bank decides to disburse your housing loan, you have every right to smile, since you can safely assume that your property documents are clear and the transaction is safe.
- Now a days, the bank may ask you to pay for the legal verification. However, most banks cover the costs in the upfront (processing)fee that you pay.
- Property documentation in India is non‐standard and non‐transparent.Hence, it helps to buy property from a reputed developer since they know the process inside out, and keep all the documents ready.
- Due to the heavy transfer charges on sale of property and/or very heavy stamp duties, some people conduct sale of property by showing “lower consideration” than agreed for, with the balance being paid either on an amenities agreement or in cash. Also the concept of sale by executing “irrevocable power of attorney” has gained ground especially in the National Capital Region. All this could restrict the choice of your lenders and may therefore increase the cost of the loan, which you might want to keep in mind while finalising such properties.