Loan Against Immovable Properties
Banks usually do not prefer to advance money on the security of immovable Properties or real estates, e.g. land and building etc. on account of the following reasons:
(i) Difficulty in ascertaining the title to the property: A banker has to spend sufficient time and money to verify the title of the borrower to the property he is offering as security. This is due to possibility of multiplicity of mortgages, absence of proper records particularly in case of agricultural lands etc.
(ii) Not readily realizable: Banks insist on liquidity. A real estate is not easily realizable without much loss.
(iii) Restrictive laws: Immovable property is subject to various restrictive laws particularly with regard to agricultural land. Banks may not be in a position to realize the security on account of various state and central laws, restricting the sale of such land. Moreover, the problem of sharing the property by other members also gives rise to further complications.
(iv) Valuation problem: The value of an immovable property depends upon its location, type of construction etc. Banker may, therefore. have to employ qualified valuers for the purpose.
(v) Legal formalities: A lot of legal formalities such as preparation of the mortgage deed, its registration, payment of stamp duty etc. are to be completed. This is quite a cumbersome work.
In case a banker decides to lend money on the security of immovable, property it should take the following precautions:
(i) The borrower should be financially sound and the business for which money is borrowed should be economically viable.
(ii) The borrower should have a clear title over the property to be given as security. It should be free from all sorts of encumbrances. In order to ascertain that there is no other charge on the property, banker should see the Register of Charges. All this work may be entrusted to bank’s solicitors.
(iii) The property should be properly valued. The work may be entrusted to qualified valuers. the value depends upon several factors such as :
(a) ownership right i.e. whether it is a freehold property or a leasehold property.
(b) the location of the property,
(c) the type of construction,
(d) the size, structure and layout, ,
(e) the rental value,
(iv) Proper margin should be kept. Generally the margin is about 50% of the value of the property.
(v) The property should be fully insured.
(vi) In case of a legal mortgage, the mortgage deed should be registered if the amount secured is Tk.100 or more. In case the borrower happens to be a joint stock company, all mortgages must be registered within 30 days of the date of their creation.
- Application for credit
- Accepted copy of sanction letter
- D. P. note
- Letter of arrangement
- Letter of Disbursement
- Original title deed of property
7. Certified copy of Mutation khatian.
8. Certified copy of C. S; S. A and R. S. Khatian
9. Duplicate Carbon Receipt (DCR).
10. Site plan/Mouza Map
11. Upto date rent receipt and Municipal Tax receipt
12. Upto date Non-encumbrance certificate.
13. Valuation certificate.
14. Registered Mortgaged deed
15. Memorandum of deposit of Title deed (in case of equitable Mortgages).
16. Registration with Registrar of Joint Stock Company (in case of Company).
17. Income Tax certificate
18. Lawyers opinion.
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