Has your house been mortgaged without your knowledge? Lessons from the Noida case that left many shaken
NEW DELHI: A couple of weeks back, over 200 families living in a prominent Noida housing society got eviction notices from a bank asking them to vacate their homes.
The notices, sent by the Union Bank of India, were nothing less than the shock of their lives for the residents of Gardenia Gateway who were living in the Sector 75 society since 2015.
According to the bank, the developer — Gardenia India Ltd — had taken a loan of Rs 78.45 crore on December 31, 2015, and had not made any repayment since.
The developer had mortgaged the project for the loan, the notice said, adding that the bank was well within its rights to attach the property to recover the debt.
The homebuyers had reportedly paid the entire amount (cost of houses) to the builder before moving in and there were no dues.
Stung by the severe backlash that followed, Union Bank withdrew the eviction notices immediately. But despite the seemingly happy ending, the questions that the incident raised still linger.
ET Online delves into the issue to find out how homebuyers can protect their interests in the event of such untoward developments.
Can a builder mortgage already sold units?
No, the builder cannot mortgage units already sold to homebuyers. “By the rule of law, the builder’s authority over a unit within the project is relinquished as soon as the buyer gets the property registered under his name at the sub-registrar’s office. After paying the registration and stamp duty charges to the government authorities and clearing all earlier dues, the homebuyer is the legal owner of the property,” says Prashant Thakur, Director & Head – Research, ANAROCK Property Consultants.
“Thus, the builder cannot mortgage such sold units to homebuyers. He can only mortgage unsold units within the project. Most importantly, after he executes an agreement for sale and any such mortgage or charge is made, then notwithstanding anything contained in any other law for the time being in force, it shall not affect the right and interest of the allottee who has taken or agreed to take such apartment,” he adds.
Hariom Dixit, chartered accountant and Director of Gayatri Group, corroborated this view: “Borrowing loan from banks for construction and completion of housing projects is very common in real estate. But ethically it is not right to mortgage already sold units by a developer or sell already mortgaged units.”
“The ideal way is to first settle the loan and then sale the units because the lending bank can stake claim to those units. The best way is to first settle the loan, release the mortgage of the units, attain NOC (no objection certificate) from the bank, and then open the inventory for sale,” he says.
How can you ensure that the builder does not take you for a ride?
Before buying a house, a homebuyers needs to do a background check on the builder. “On the Registrar of Companies website, you can easily find out if the builder has taken a loan and what s/he has mortgaged against it,” Dixit says.
There is a way out even if the project where you want to buy a house has been mortgaged against a loan by the builder.
“In such cases, a buyer can ask the builder for the account details of the bank from where the builder has taken a loan and pay the EMI in that account. Besides, it is highly recommended that buyers ask the builder for an NOC from the bank where he has taken a loan from. This will help homebuyers avoid any prospective risk to their ownership rights,” says Dixit.
However, homebuyers won’t have a strong legal case in the absence of NOC and if the EMI is going to a different bank and not to the one where the builder took the loan from, Dixit further explains.
What action can be taken against such errant builders?
Homebuyers can take a legal action. “In cases like the Noida one, it needs to be seen when the builder mortgaged the property with the bank — before the registration of the units, or after it. If the property was mortgaged after registration, then homebuyers have a strong legal case,” says ANAROCK’s Thakur.
“On the other hand, it also shows a slip by the bank that offered a mortgage loan against a sold-out property. That said, the affected homebuyers will still need to fight a legal battle, which involves going to their respective RERA authorities, to state high court, debt recovery tribunal or even directly head to the CDRC at the district, state or national level,” he adds.