The economic reforms undertaken by India nearly two decades ago have resulted in the growth of many areas that are essential to the country’s financial system. Financing is an area that has shown remarkable growth in recent times and is considered to play an important role in the growth and development of the country.

Bank financing in the housing sector has completely changed the way real estate is bought and sold in the country. Certainly it has helped groups hitherto marginalized from society to have access and fulfill the dreams of owning property, which as a jurisprudential concept is as old as the beginning of the formation of social society among humanity. A person’s desire to own something of his own that he can use and enjoy to the exclusion of all others has been a fundamental right recognized by all legal systems throughout the world.

The formal mortgage housing finance sector continues to elude lower income groups due to the unavailability of clean titles, high transaction cost, and difficulties in risk assessment due to irregular income behaviors.

The credit market revolves around mortgages. The creation of guarantees through the deposit of property titles is the most common method used in the industry due to its simplicity and profitability. Mortgage Deeds have tax implications and are therefore an avoidable option compared to the previous method. This fundamental problem of the absence of a clear title prevents a greater penetration of the credit business in the entire market. Not only is it affecting the home loan business, but it also has far-reaching consequences. Even the courts have considered the legality of creating an equitable mortgage by depositing legally invalid documents such as the letter of award, possession, etc. however, opinion is divided between various courts and the matter is now being considered before the Hon’ble Supreme Court.

Therefore, a fundamental need is felt to clearly define the rights of people in tangible objects to ensure that people enjoy such rights without any confusion and to the exclusion of others. This gives rise to a legal need to clearly define title to properties owned by people. The growth of the credit market in the housing sector largely depends on how soon a legal and efficient system can be developed to register and recognize people’s rights to property in the form of clear titles.

In India, individuals can claim title to property through various legally recognizable means. The most common and legally efficient way to claim the property title is to have a deed of sale in favor of one; however, even such a legally executed document is not free from conflicting claims made by others to the title.

These conflicting claims stem from the inefficiently maintained land title registry system of state controlled and managed property registries, whose inefficiency and corrupt practices have become the order of the day. It is commonplace to point out that even a duly registered deed of sale is questioned due to its lack of authenticity and legal competence to transmit clean titles. Such a problem is attributable to fragmented cadastral registries that do not have real-time access to other cadastral registries to avoid multiple registrations. Even loopholes in registration laws are exploited by corrupt players to obtain multiple registrations on the same property by having the registration affected in a different registry than where the property is located to avoid detection.

In Delhi we have seen many examples where property sales deeds located in Delhi have been registered in Mumbai by exploiting a legal provision that allows a land registry in Mumbai to register properties located anywhere in India.

Succession laws in the country allow family members to make a competitive claim to the property of a person claiming property as their own on the grounds that the property, being ancestral in nature, necessarily belongs to all members of the family. and not just one.

Also, farm holdings have their own peculiar legal problems. The laws recognize the property through the possession and registration of the cultivation rights in the legal registers. Such property claimed on the basis of the registration of rights in a legal registry and not on the basis of a document of title acts as an impediment in the housing credit market.

Credit helps people to aspire beyond their existing means by allowing them to take advantage of borrowed money, and in the absence of such facility, the buyer is forced to buy cheap and not-so-good options that are within their limited resources. Such cheap options give rise to unplanned development in the form of unauthorized developments and banks stay away from properties in such areas due to lack of clear title and construction as per guidelines issued by the Reserve Bank of India based on the judgment of the Delhi High Court.

Another problem facing the housing credit market today is the legal status of state-owned land. Due to the socialist policies adopted earlier, the land always belonged to the state, which would allow its subjects to use it as tenants. I mean leased land. Title never passed to the occupant or lessee. Even if the rules allow the transfer of title to the lessee, such transfer is fraught with legal complications and is a costly affair. Banks are usually shy when it comes to financing transactions related to leased properties. Such a legal requirement creates legal complications and thus acts as an impediment in the growth of the housing credit market.

Unless we resolve and address the fundamental issue of title to property by enacting laws that remove all complications and the government strengthens foreclosure laws, land registries, creates the enabling environment for the creation of credit bureaus , insurance companies/mortgage guarantees, etc. It will be very difficult for the real estate credit market to reach all sectors of society, in particular the weakest and most disadvantaged sectors of society.