Real estate, mortgage and coordinates-II

Qazi Mahmudur Rahman concluding his two-part article Real estate is a common item for banking business in Bangladesh. In current practice, a bank lends funds against business. This is true. Besides this, they secure the loan by mortgaging real estate property. RM and credit administration personnel of a bank are always in a confusing position for selecting a fresh and good real estate property. On the other hand, some corrupt borrower always tries to place the fictitious property for mortgaging. So mortgage is risky in some cases. As a result, many cases are pending in court of law due to fictitious titles to land. For mitigating the mortgage risk, banks usually go to law firms. A maximum number of law firms give their opinions very quickly without verification of the genuineness of the documents and property. Some law firms, express opinions only technically. In some cases for reasons of shortage of manpower and pressure of disbursement, detailed reviews of the documents remain pending for long. In most of the cases, because of shortage of experience and knowledge, bank officials overlook the fake documents and property. Under such situations, banks have to have adequate knowledge for taking real estate as a mortgage. A short guideline on ideal real estate as security for mortgage is given below: Characteristics of a good real estate as a financial security: n Location of the property is very much an important issue. We know that only most prospective property should be considered as collateral of the loan. High land is more valuable than low ones. Land position is vital for land valuing. Roadside land is more valuable. n Clear demarcation is very much important characteristics of a good land to avoid future complications. Complications may be arisen from bad side landowners. Clear demarcation may be done in a permanent manner through heavy pillarsboundary walls etc. n Legal Accessibility or independent road approved roadsgolis are required for taking future possession or easy selling. n Banks will chose that land, the price of which will remain stable and has a market demand. n Title of the property in the name of 1st Party (borrower) is encouraged. Some time 3rd party mortgages may cause mortgage risk. n Banks should be confirmed physical holding of possession by ownersproposed mortgagors before creating mortgage. n Mutation Khatian, duplicate carbon receipt and up-to-date land development tax etc., in the name of proposed mortgagor (land owner) all such, up-to-date and old documents should match with the title of the deed. n Permanentheavy signboard should be fixed on the proposed property in name of landowner for identifying the genuine owner of the property. n There must be approved building plans duly approved by the concerned authority (land including building). n Possession Certificate from local authority such as City Corporations, Pourashavas, or Union Parishads does need to be cheeked. Mortgage risk is the risk, which can occur for reasons of fraud mortgage. Mortgage risk may be reduced by mitigates the following tasks: i) fake topological map; ii) threat of river erosion; iii) 3rd Party's Land; iv) land without having an independent excess; v) age limit of the proposed mortgagor should be between 18 and 60 years; vi) land or building under enemy (vested) or abandoned property; vii) khas land, forest land or any other government acquired land; viii) land of waqfa, minor property, school, college, graveyard, hospital, and religious places are not eligible for mortgage against loan; ix) migration risk. (This risk arises with people having a tendency to migrate illegally abroad without government clearance). Required Document for primary assessment: n The deed of title in the name of landowner; n Stamp checking: government duty paid appropriately; n History of 25-year ownership with 'Baia' deed and other documents to find out the chain and other claims; n CS, SA, RS and Dhaka City Jorip (for Dhaka) KhatiansSylhet Jorip with chain of ownership; n Topological map to be matched with title schedule; n Up-to-date receipt of land development tax receipt ground rent receipt; n Up-to-date City Corporation Union Parishad holding tax receipt for the land; n Non-Encumbrance Certificate (NEC) for 12 years from sub-Registry Office the office of the District Registrar; n Building Plan with construction permission letter; n Registered General Power of Attorney executed by landowner in favour of the Developer Company (if it is a flat); n Registered Deed of Agreement between landowner and the developer for construction by the developer (if it is a flat); n Inheritance Certificate from Word CommissionerCourtUnion Parishad Chairman. (Warishan [succession] certificate); n Mortgage Permission from Lessor (if Leased Property); n Lease Agreement in the name of executants (if Leased Property); and n The Geographical Coordinates as pointed out, by using GPS or Google Programme. Banks should visit the property and identify the holder of real possession and owner of the real estate. They may get information of social festival that took place at the location of the proposed real estate to be mortgaged. Besides this, some additional tips are given here for banks: n Geographical coordinates of the land should be considered as basic position mark of the land. n Geographical Coordinates should be mentioned at the place of the schedule of the property of the every sale mortgage deed which may be find our by Global Positioning System (GPS) or Goggle ProGoggle Map. n Our National All Topological Map should be modified with Geographical Coordinates position. n The northwest corner may be considered as basic position of every land. n Geographical coordinates (basic position) should be introduced in the Credit Information Bureau of Bangladesh Bank. From this any Credit Risk Management (CRM) officers may mitigate the double mortgage risk. n Using geographical coordinates side by side Bangladesh Bank may provide mortgage report to the scheduled bank. This may help to reduce duplicate mortgage problem. n Every bank has to have a government gazette notification about property, Enemy Property (Vested Property) etc., for avoid illegal mortgaging. n The registered book at the office of the sub-Registrar should be verified. n CIB may include geographical coordinates of the mortgaged property for avoiding double mortgage. n Bangladesh Bank may take steps in order to mitigate migration risk. n Stamp duty might be reduced in the case with Islamic Mortgage. In the case of enhancement of the amount of loan in the middle of the period, the borrowers have to pay full stamp duties which need to be reduced. n Fake visit report or unprofessional behaviour by relationship manager should be punishable. n Fake valuation or overvaluation the property should be considered a punishable offence. n Borrowers, mortgagors and guarantors should be liable for fake documents. To address the need for increasing residential facilities for a large number of the country's population, we have to develop the infrastructural support system in both rural and urban areas. From the side of private entrepreneurs, they have to go to bank for getting financing facility. Day-by-day mortgage practice will increase. So we need a transparent platform where there should be no scope for fake mortgage and the related problem of non performing loans. The writer, Qazi Mahmudur Rahman, MBA, DAIBB, is Manager, Credit Administration, Bank Alfalah Ltd, Country Office, Dhaka. He can be reached at e-mail: qazi.mahmudur@bankalfalah.com.bd