In the recent monetary policy review, the Reserve Bank of India kept the key policy rates unchanged. So, home loans rates will most likely remain unaffected in the near future. As of now, many lending institutions are offering home loans at historical low interest rates, at sub-7 percent a year. Given that most buyers finance their house purchase through home loans, a low interest rate is a big catalyst in driving demand. Make sure you have all your documents, as well as those of the property before making the token payment to the seller. Here are a few of the important property documents you must check for legality and authenticity.
Chain of title documents
The first and the foremost document that is required is the chain of title. It establishes the fact that the seller is authentic and that he is the actual owner of the property and currently has the rights to transfer the property. “The chain of title is a critical document that identifies how the property is transferred from one person to another. In the absence of a clear title chain for transfer, such properties may not be appropriate to create charge on,” says V Swaminathan, CEO of Andromeda and Apnapaisa.
“The bank or the lender, and also the new buyer, must ascertain the chain of title back to its original owner to avoid any future legal issue arising out of a legal claim by any of its previous buyers,” says Mani Rangarajan, Group COO, Housing.com, Makaan.com and Proptiger.com
Says Adhil Shetty, CEO of Bankbazaar.com, “It is safest to have a chain of title going back to the last 30 years, as a document 30 years or more is presumed to be validly executed under Section 90 of the Evidence Act.”
MAP or approved plan
Next, you need to find out whether the property is constructed as per the construction bylaws and rules. “Most lenders will not approve a loan without these documents. The title of the property could be clear. However, the construction activity may be unauthorised. The building plan establishes whether the property is authorised or unauthorised. The approved layout plan is the go-ahead from the local development authority. In the absence of these, the authority has the right to demolish the construction. So the lender will not approve a loan if these are missing,” says Shetty.
However, in some cases, especially when you buy a property directly from a developer, the lending institution may not ask for a map and plan if it has already lent to other buyers of that project. “Normally, in group housing societies, banks obtain it from the respective developers to take a call on whether to fund the home buyers of the given project or not. So, while buying an apartment, the bank may not ask you for a Sanction Plan but just your Floor Plan and Apartment Layout,” says Rangarajan.
“An approved plan becomes more important for a property if there is no occupancy certificate (OC) available or if applied for,” says Swaminathan. OC itself proves that the construction was done according to rules and that the house is suitable for living.
Allotment letter and possession certificate
If you buy an apartment in a housing society, or from a housing board or a private builder, you must ask the seller to provide the allotment letter and possession certificate. The allotment letter is provided initially to the home buyers who buy property directly from housing board or builder, whereas a possession certificate is issued after completion of the property and handed over to the allottee or the buyer.
Khata and mutation register extracts
Depending on the type of property and the locality in which it is located, additional documents may be required. “Khata Certificate and Extracts, and Mutation Register Extracts are issued by the local revenue bodies and are a proof that the property is recorded in the local municipal records and the construction has been done according to an approved plan,” says Shetty. It is mostly required when you apply for a loan to buy a resale property. But it’s pretty common for banks to ask for it, in most parts of the country.
Encumbrance certificate
Before sanctioning a loan on the property, lenders will ask for the encumbrance certificate to ensure there are no outstanding dues against the property. “The encumbrance certificate contains all the transaction details related to the property that occurred over a period of time. An encumbrance certificate is required to prove that the property does not have any pending legal dues or mortgages,” says Shetty.
Society dues and Tax receipts
Lending institutions can also ask for recent receipts related to payment of society maintenance charges, municipal tax paid and so on. These receipts serve the dual purpose—supporting documents to establish current ownership and possession of the property, as well as that there are no dues related to society charges and authorities.
The lists of documents mentioned above are not exhaustive and lending institutions may ask for various other documents to approve loans.
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