The real estate sector is one of the most lucrative investment avenues. However, if you are planning to buy a home through a home loan, know that your lender will ask you to submit several documents to help them ascertain your repayment capacity as well as to ensure that the property you are investing in is not mired in any kind of legal controversy. One of the documents that lenders ask people to submit is the Non-Encumbrance Certificate.
What is the Non-Encumbrance Certificate?
The non encumbrance certificate is a legal document that contains details of all the legal and financial transactions that happened over a property over some time. The issuing authority releases the non-encumbrance certificate for a specified period.
When you apply for housing finance, you essentially secure yourself funds by pledging the property bought with the loan funds as security. Therefore, lenders want to do everything to make sure that the property you are investing in is free of all kinds of liens and monetary liabilities. The non-encumbrance certificate helps loan applicants establish that.
One can obtain the non-encumbrance certificate from the sub-registrar of their city. While applying for this certificate, you will be asked to specify the period for which you need the non-encumbrance certificate. If the property you are planning to invest in has no encumbrances against it, the sub-registrar’s office will release Form 16. However, if the property has any disputes or encumbrances against it, the sub-registrar’s office will release Form 15. The non-encumbrance certificate must contain all important details, such as the details of the owner of the property, all details related to the property and the mortgage deed, transactions that have happened against the concerned property, etc.
We now understand what is a non-encumbrance certificate. Let us now try to understand why lenders ask for this legal document.
Importance of the Non-Encumbrance Certificate
These days, frauds related to land and property have become quite common. Sometimes, lenders build apartments and villas on land not approved for sale. Sometimes, many societies flout many government rules and regulations. Similarly, a lot of property owners try and sell a property even when it has a loan or encumbrance against it. Thus, every property buyer must do their due diligence before buying a property. When people avail of a home loan to buy a property and the property is mired in legal issues, the lender also suffers. Thus, all lenders require a non-encumbrance certificate mandatorily when applying for a loan. A non-encumbrance certificate tells you and your lender everything you need to know about a property and the transactions that have happened on it before you buy it. More importantly, the non-encumbrance certificate also serves as proof of ownership. In the absence of this document, the transfer of property from one owner to another is not considered complete.
The non-encumbrance certificate is also needed in one more scenario. If by mistake, a property owner is unable to pay property tax for more than 3 years, they must present the non-encumbrance certificate to the village officer or panchayat and only after they have done so will they be able to pay the pending taxes.
What is the Process to Obtain the Non-Encumbrance Certificate?
These days, the process of obtaining a non-encumbrance certificate has become fairly easy. Borrowers can apply for a non-encumbrance certificate both online and offline. To apply for a non-encumbrance certificate online, follow these simple steps:
- Go to the official government website and select the option ‘stamps and registration.’
- Next, select the form for the encumbrance certificate. Download Form 22 and fill it out properly by putting in the desired information.
- Before submitting the document, you will be asked to attach a non-judicial stamp of Rs.2. Along with this, you will also be asked to attach address-proof and some property-related documents,
- Apply and wait for the sub-registrar’s office to get back to you.
- The sub-registrar’s office will send a representative to go through all the financial transactions that happened over the property. They will then release the non-encumbrance certificate based on their findings. The sub-registrar’s office will take 6 to 30 days to release the non-encumbrance certificate.
If you are planning to apply for a home loan, make sure to get the NOC certificate. Also, use the housing loan EMI calculator to plan your repayment strategy and for monthly budgeting.
