Fraudsters would soon find it difficult to raise multiple loans against the same property with the budget setting aside Rs 25 crore for a Central Electronic Registry. The Central Electronic Registry (CER) would be a database of all mortgages and the banks that have a charge. So in future when a borrower seeks to avail a loan against an apartment or a house, the lender will be able to verify whether anyone has already got a charge on the property.
Today a majority of home loan frauds are in cases where borrowers raise multiple loans using forged documents. In some cases the fraud is perpetuated by the developer who sells an apartment under construction to two different buyers. Earlier this month it has been had reported that the government may announce plans to set up such a registry to mitigate home loan frauds.
All banks and housing finance companies will provide data on title deed and home loans borrower to the central registry. Next time, a bank processes a home loan proposal, it will first verify with the central registry if the title deed is clear and not registered in any other entity’s name, or if any other bank has taken it as a security.
It is estimated that the banking sector has reported over to Rs 400-crore home loan frauds. These issues could be well tackled once a registry is formed. As of now, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests (SARFAESI) Act in India has enabled provision to set up a central registry. Thus, the government will have to issue a notification which will be the first step to the formation of the registry. However, the budget has not given more information about other stake holders in the registry. IBA has already submitted a feasibility report on the matter.