Central registry eyes existing mortgages

Remya Nair - livemint.com

A central registry set up by the government to prevent property loan frauds will soon expand its scope to include existing mortgages under its ambit as well.
The Central Registry of Securitisation Asset Reconstruction and Security Interest of India (Cersai) was launched on 1 April to prevent fraudulent multiple borrowings against the same property.
It was, however, mandatory for banks and housing finance companies to only register transactions from the beginning of the fiscal year 2011-12. As a result, while details of all new mortgages are being registered, historical information was not shared with the registry.

“We are in the process of examining how we can bring the existing mortgages as on 31 March this year to the portal. Data on existing mortgages will make the registry a comprehensive database,” said R.V. Verma, managing director and chief executive officer, Cersai. “We will be shortly writing to banks and financial institutions about this.”
The mortgages registry has been conceptualized on the lines of Credit Information Bureau (India) Ltd, which maintains the credit history of commercial and consumer borrowers, with real time flow of information to increase transparency, according to bankers and analysts.
M. Narendra, chairman and managing director of Indian Overseas Bank​, said the move to increase the scope of the registry will help banks unearth multiple loans against the same property, especially in the retail segment.
“Increasing the scope of the registry to existing mortgages could spring quite a few surprises due to the sheer volume of the mortgages. Instances of frauds could be more on the retail side,” said Robin Roy, associate director at audit and consulting firm PricewaterhouseCoopers India. “When it comes to loans to builders, the amounts involved are huge but fewer in number and banks must be doing due diligence.”
In this year’s budget, finance minister Pranab Mukherjee announced plans to set up the registry under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (Sarfaesi Act). It was envisaged as an electronic database of all immovable properties in the housing and commercial real estate segments on which mortgages had been taken.
“Making banks and housing finance companies compulsorily share historical data may require some amendment to the Sarfaesi Act. The Act under which the registry was set up only makes it mandatory for banks and institutions to register prospective lending,” said Verma.
“We can do the legislation in due course of time. But we are trying to see if we can do without that (the amendment). We will look to expand the scope through moral suasion and by providing some incentives to the lending institutions,” he added.
All lending institutions report transactions to the registry that records an average of 3,000-4,000 transactions a day and has so far registered around 300,000 transactions.
Bank credit to housing and commercial estate as on 29 July stood at Rs.4.77 trillion, a growth of 16% from a year earlier, according to data available with the Reserve Bank of India.
“Similar disclosure norms were already present in the system. The developer firm and the lending institution have to jointly get the register of charge certificate from the Registrar of Companies before the bank disburses the loan for construction,” said Navin Raheja, chairman and managing director, Raheja Developers Ltd. “Bringing the details of the commercial/ construction loans under the ambit of the central registry will simply bring another level of transparency.”
Still, persuading banks to register all transactions related to earlier mortgages may not be easy as it will be a huge exercise and will strain banks’ information technology networks.
“It will be a time-consuming process for banks. They will have to create electronic records of the title deeds and then transfer it to the registry,” Roy said.