After several months of roaming the city, visiting multiple building sites, talking to multiple friends/ family members, checking multiple reviews, you finally zero in on that one dream home (yes, you might need to pay a little more than what you had initially budgeted, but that’s ok – after all, it is a once in a lifetime investment!)
Once you have selected your home, you also start the process of the home-loan. Luckily, the project is ‘pre-approved’ by some banks and financial institutions. The builder, in fact, tells you to go to the bank that has pre-approved the loan, since the loan disbursal will be faster. You go to the bank and you are informed that they have legally verified the property. All seems good. So, you should quickly take a loan from that bank. Shouldn’t you?
Well, before you start believing the bank or the builder, there is something you would need to know about the home-loan, the legal verification that the bank does and the impact (if any) it has on you as a borrower :
- The loan is based your credit-worthiness, not that of the builder – The bank determines your ability to repay the loan; based on which it issues the home loan. Banks perform some very basic checks about the project (does it even exist in the first place, where exactly is it etc.) and assume that you are going to take care of the rest! The bank loan is tied to your salary – and your creditworthiness.
- Title verification/ title search is the borrower’s responsibility – Banks issue a home loan to you i.e. the home buyer. There is an inbuilt assumption that you have or will take care of ensuring that the property has a clear title (for more on this, read this blog: http://www.nitinbhatia.in/real-estate/property-title-search/). Yes, the banks get some sort of a legal check done, but that is usually very basic. More importantly, if there are any legal issues tomorrow, it is you who still has to repay the bank loan.
- Pre-approved projects aren’t necessarily as safe as they appear – When a bank pre-approves a project, it means that the bank has done legal verification at a very early stage in the project’s life. If any problems have come up later, those might not have come up the radar. More importantly, there is a very good chance, that the builder has taken a loan from that very same bank for that specific project. The builder’s ability to repay the bank is contingent on you (buyer) buying that apartment and hence the bank will in most cases give you a loan.
- Even if you have paid a legal fee to the bank, you should still get an independent legal check done – Well, like we saw, the bank is secure because you (the buyer) are liable to repay their loan. So, their risk is taken care of! Who is taking care of your risk? The builder? The bank? So, you as a buyer need to safeguard your own interest by getting your property verified by the best legal experts you can find.
Ultimately, it doesn’t matter to the bank if the project has stopped midway, if the builder has run away or if the land is under litigation – they have issued the loan to you. Their business is that of issuing loans and not verifying if the property is genuine (had banks been so good at verification, Vijay Mallya would never have gotten loans in the first place).
To get the right advice on legal verification of your property, call us up on 080-48574040 or visit www.zippserv.com for details.