Understanding Technical and Legal Verification in Housing Loan

January 9, 2023 . Home Buying Insights . 10 min read

The majority of financial institutions make use of a wide variety of risk assessment methods to determine whether or not a borrower is creditworthy. These kinds of instruments are necessary for both the application and the authorisation of housing loans. Despite this, there are circumstances in which loan applications are denied owing to various legal and technical reasons. To ensure that you are adequately prepared to verify your application for a housing loan, we have compiled all of the information on your property’s technical and legal verification.

What is the legal verification of a property?

There are two phases involved in the process of legally verifying the property in preparation for the home loan. In the first step, the search that is associated with the property, as well as the validation of the papers that are associated with the property, are examined. The title summary is then prepared in the subsequent step of the process. In this report, each and every legal verification and property check is discussed in detail.

Legal verification impact on housing loan application

A property embroiled in a court fight or requiring a complicated financing structure will never get funding from a bank or other financial institution. If the lender receives an unfavourable Legal Verification report from the team of legal experts, your whole home loan application will be denied.

Important documents for legal verification of property

The following is a list of the essential documentation required for the legal verification of the property.

1.    Sales agreement

The terms and circumstances agreed upon by the property buyer and developer are investigated. In addition, the agreement’s total sum is evaluated, and this evaluation serves as the foundation for determining the loan amount that will be disbursed.

2.    Non-agricultural order

This is the statement that outlines that authorisation has been granted for the land that was previously used for agricultural purposes to be used for purposes other than agriculture.

3.    Copy of the 7/12 extraction

The particulars of the property, including its size, location, and ownership, are investigated in great depth and thoroughly checked out.

4.    Occupancy certificate

The fact that the relevant authorities have issued an occupancy certificate to a building or project implies that it is fit for human habitation.

5.    Commencement certificate

The approval to begin building is shown on the legal document known as a commencement certificate, which the local government agency grants with jurisdiction over the area.

6.    RERA Registration

The authorised RERA certification of the builder and each residential project under consideration is investigated.

7.    Plan approval copies

Verification is performed on the copy of the building plans that the local government has approved.

What is technical verification of a property?

Checking the property’s physical particulars is an integral part of the technical verification process for the property. Determining the property’s true worth on the market should be considered the primary purpose of the technical inspection of the property. The independent chartered accountant and government-registered valuer are the ones who carry out the technical verification of the property.

After doing a comprehensive check of the property’s technical aspects, the appraiser will then provide the assessment to the bank so that the latter may decide on the house loan. The following elements are included in the technical verification of the property:

• Verification of the property’s address
• Examining the site’s dimensions, including the overall built-up plus carpet area
• The flat’s latitude, longitude, and coordinates
• Property location information
• Total realistically attainable value

Technical verification impact on housing loan amount

Imagine that you are about to spend ₹ 1 crore on a piece of real estate. You may be fully aware that most banks won’t provide loans for more than 80 percent of the value of a property. As a result, you get ₹ 20 lakhs from a different source and then submit an application to the bank for a housing loan of ₹ 80 lakhs. The bank’s technical appraisal team inspects your property and concludes that it is worth ₹ 90 lakhs.

If the lending institution you’re considering can only lend at an LTV of 80% and won’t budge, you’ll be limited to a house loan of about Rs. 72 lakhs. If you want to continue, you’ll need to come up with another ₹ 8 lakhs.

Technical and legal verification charges on housing loan

Lenders often outsource technical and legal verification of a property to independent firms. Therefore, it is customary to place the whole financial burden of this on the borrower. Some financial institutions charge a discrete technical and legal evaluation fee, while others may include it in the overall processing cost.

The technical and legal verification service cost will vary from one mortgage lender to the next. The standard technical and legal evaluation fee levied by most banks is between ₹ 5,000 and ₹ 10,000.

How to simplify technical and legal housing loan verification

Relationships between developers and financial institutions are common. Applying for the developer-recommended mortgage may speed up the home loan approval process. Apply for a mortgage loan at a bank with a working relationship with the builder.

You won’t have to do any time-consuming and perhaps embarrassing legal and technical due diligence. These speeds up the home loan procedure and reduces the costs associated with legal and technical verification.

Conclusion

Before your lender starts the process of verifying your information and evaluating your property, it is essential to have all of the required documentation available. At the end of the day, you can put your mind at ease knowing that the home you want to purchase is in good standing, legally and technically.

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