X wants to purchase a property where 50% of the amount he will pay?
A registered sale agreement evidences the sincerity and seriousness on the part of both seller and purchaser as it requires ad valorem stamp duty besides legally binding both the parties for the transaction. However, it does not constitute the transfer of ownership of the property to the purchaser in terms of Transfer of Property Act 1882. As a result, an equitable mortgage (EM) can not be created on the basis of it. Therefore, a simple sale agreement between the two parties may also suffice the purpose, if bank is otherwise satisfied. The bank will proceed as per the sale amount indicated in the sale agreement. The purchaser of the property or the applicant borrower in the instant case will have to deposit the receipt of the amount paid directly by the purchaser to the seller as an advance money. the bank will then prepare a bankers cheque or a draft for the remaining amount or the loan amount whichever is higher. If the amount is higher then purchaser will have to deposit the remaining amount / share of his contribution ( margin ). The most important question is whether the Bank will deliver this cheque to the applicant borrower or not ? The Bank can not and will not hand over this Bankers cheque / Draft as there will not be any security for the loan and as such the loan will become clean or insecure which is not permissible under home loan although the Bank has loan documents signed by the borrower as primary security. There are two options available to the bank To take an interim security from the applicant borrower to cover the housing loan till such time the title deed of the property under purchase is deposited with the Bank and a valid EM is created. In order to facilitate the borrower ( purchaser) and also to counter the stiff competition in the mortgage loan / housing loan sector, banks depute their staff to the registrar office to deliver the Bankers Cheque / Draft to the seller after execution of the documents ( registry). The 2nd option suits the applicant borrower and therefore most bank has adopted this practice and this is in vogue. I think this clarifies the process of disbursal of home loan, process of registry vis a vis position of seller.