Understanding Legal and Technical Verification in Housing Loan!

When you're in the process of applying for a housing loan, one of the most important steps you'll have to face is the legal and technical verification. The process is meant to protect both the lender and the borrower by checking that the property is legally valid and in good condition. Knowing about this process is important because it affects whether your housing loan gets approved and paid out. Let’s understand in detail!

What is Legal Verification?

Legal verification is the process where the lender evaluates in detail the legal standing of the property you're planning to purchase. This means that the property has a clear title, free from any legal disputes or encumbrances.

Key Aspects of Legal Verification

1. Title Deed Verification:

• The title deed is an important document that proves who owns the property. When the lender checks the property’s legal status, they verify the title deed to make sure the seller legally owns it and has the right to sell it.

• Important: make sure that the title deed is free from any previous mortgages, liens, or legal claims.

2. Property Chain Verification:

• The chain of ownership is a record showing who has owned the property in the past. The lender reviews this history to make sure the property has been legally passed from one owner to the next.

• Any gaps or misinformation in this chain can raise red flags and delay or halt the loan process.

3. Encumbrance Certificate (EC):

• An Encumbrance Certificate is a really important document that reflects any legal liabilities, mortgages, or claims on the property. The lender will review this certificate to ensure that the property is not pledged or mortgaged elsewhere.

• Tip: Obtain an EC for at least the past 12-15 years to confirm the property's legal status.

4. Sale Agreement and Registration:

• The sale agreement outlines the terms and conditions of the property sale. The lender checks this document for any clauses that could affect the loan.

• Registration of the property is another essential aspect. The lender will verify if the property has been registered with the local authorities, as unregistered properties are not legally recognized.

5. Approvals from Statutory Authorities:

• The lender makes sure that the property has received all necessary approvals from local statutory authorities, such as the municipal corporation or development authority.

• This includes verification of land use, zoning regulations, and any environmental clearances.

6. Occupancy Certificate (OC):

• An Occupancy Certificate is issued by the local municipal corporation after the construction of the property is complete. This certificate ensures that the building complies with all the necessary building codes and regulations.

• Important: Without an OC, the property is considered illegal, and the lender may refuse to sanction the loan.

What is Technical Verification?

Technical verification involves evaluating the physical aspects of the property. The property should structurally sound good, comply with local building regulations, and match the value as claimed by the seller or buyer.

Key Aspects of Technical Verification

1. Property Valuation:

• The lender conducts a valuation of the property to determine its current market value. This is really important because the loan amount is often a percentage of the property’s value.

• Tip: The lender may appoint an independent valuer to assess the property, which ensures an unbiased valuation.

2. Construction Quality and Structural Integrity:

• The lender examines the construction quality of the property, including materials used, design, and overall structural integrity. This is particularly important for under-construction properties.

• Important: Any signs of poor construction or structural issues can lead to the loan being rejected or the loan amount being reduced.

3. Adherence to Building Plans:

• The lender checks if the property has been constructed according to the approved building plans. Any deviations or illegal constructions can pose a risk to the lender and the borrower.

• Tip: Ensure that any modifications or extensions to the property have been approved by the local authorities.

4. Property Accessibility and Infrastructure:

• The lender assesses the property’s accessibility to roads, water supply, electricity, and other essential infrastructure. Properties in remote areas or with poor infrastructure may face challenges during the loan approval process.

• Tip: Properties in well-connected and developed areas are more likely to get a higher valuation.

5. Verification of Property Dimensions:

• The lender verifies the property dimensions as mentioned in the legal documents. Any discrepancies in the size or layout can lead to complications in the loan process.

• Important: Always cross-check the property dimensions with the documents provided by the seller.

6. Builder’s Reputation:

• For under-construction properties, the lender also considers the reputation of the builder or developer. Projects from reputed builders are more likely to pass technical verification smoothly.

• Tip: Opt for projects from well-known builders with a proven track record.

How Legal and Technical Verification Affect Your Loan Approval

Whether your housing loan gets approved depends on the results of checking the property’s legal and technical aspects. If the property clears these checks, the loan process continues without problems. But if issues are found during these checks, it can cause delays or problems with the loan approval.

• Loan Rejection: If the property has legal disputes, an unclear title, or structural issues, the lender may reject the loan application outright.

• Reduced Loan Amount: If the property’s valuation is lower than expected or if there are minor legal/technical issues, the lender may approve a reduced loan amount.

• Delay in Loan Processing: Any discrepancies in legal or technical verification can lead to delays in the loan sanctioning and disbursement process.

Summary

Conclusion

Knowing how the legal and technical checks work is important when getting a housing loan. These checks confirm that the property is legally clear and in good condition, which protects both you and the lender. By being proactive, doing thorough research, and working with trusted experts, you can handle this process effectively and confidently buy your dream home.

Frequently Asked Questions (FAQs)

1. What is the difference between legal and technical verification?

• Legal verification checks the legal standing of the property, while technical verification assesses the physical aspects and construction quality of the property.

2. How long does the verification process take?

• The time frame can vary, but on average 1 week.

3. Can a property with legal issues still qualify for a loan?

• Not at all.

4. What should I do if the property fails technical verification?

• If the property fails technical verification, you may need to address the issues identified by the lender, such as structural repairs or obtaining missing approvals.

5. Can I proceed with the purchase if the lender rejects the loan?

• If the lender rejects the loan, it's advisable to reconsider the purchase or resolve the issues before reapplying for a loan.