If you're planning to invest in real estate, you might have come across the term 'non-encumbrance certificate'. And if you're a first-time buyer, you might not know what a non-encumbrance certificate is and why is it required.
Well, it is one of the vital documents in real estate and is required before applying for a home loan. An EC acts as proof of the property's existence and holds all details of its history.
Before you seal the deal on the property, make sure you obtain all important documents to have a smooth buying process. There are 3 major documents in the real estate industry -
- Occupancy Certificate (OC)
- Completion Certificate (CC)
- Encumbrance Certificate (EC)
What is a non-encumbrance certificate?
When you avail of a loan to purchase a house, the lender will levy a charge on the property as security against the credit. As a result, the lender will hold the property as a mortgage for the loan period. But before applying for a loan or while buying or selling an establishment, you must ensure the property does not have any legal or monetary liabilities. For this, you need to obtain a non-encumbrance certificate from the sub-registrar of your city.
The certificate of non-encumbrance includes all the legal and financial transactions of the property over a certain period. It enables you to sell the property and transfer the ownership with no legal disputes. The certificate also includes details of the property, owner, mortgage, release deed, transactions against the property, gift settlements, etc.
A non-encumbrance certificate is of two types-
Form 15 - The sub registrar's office issues this certificate if the property has existing monetary or legal liabilities during the requested time.
Form 16 - This is a NIL certificate that the sub registrar's office issues indicating no disputes on the property for the requested time.
Why is it important to obtain a non-encumbrance certificate?
Now that you understand what a non-encumbrance certificate is, let's dive into why you need one. Before investing in a property, you must ensure that it is free of monetary or legal charges. For example, if the owner has taken a loan to buy the property, you need to make sure it is cleared before buying or selling it. Financial institutions usually verify this document for an existing loan on the property before approving your loan request.
If you do not obtain this certificate before buying a house, you will have to bear any legal or financial liabilities on the property. Additionally, the certificate of non-encumbrance also serves as proof of ownership title. Therefore, it is a crucial document that is required for transferring the property.
If the land or property tax remains unpaid for more than 3 years, you have to present this certificate to the panchayat or the village officer to update the records. You also need the non-encumbrance document to withdraw PF for buying a property or building a house.
If you're buying a property for the first time, obtaining an encumbrance certificate is a must. It will provide you with all relevant details of the property's history along with its previous owners.
How can you obtain a non-encumbrance certificate?
You can easily obtain a non-encumbrance certificate online or offline from the office of the sub-registrar of your area. To apply for a non-encumbrance certificate online, visit the official government website and follow these simple steps -
- Go to the Government Forms section and click on Stamps and Registration.
- Here, select the Application Form for Encumbrance Certificate.
- Download Form 22 and fill in the required information.
- Affix a Rs. 2 non-judicial stamp, attested copy of address proof, property details, and other required documents with the form.
- Submit the application to the sub registrar's office.
- The sub registrar's office will inspect the property for all previous transactions during the requested period.
- It usually takes 2-3 working days to process the online application and you will receive the certificate in 6-30 working days.
Buy your dream home with Tata Capital
Buying a property can be an exhausting task, especially if you're a new buyer. Even a minor error can cause major inconveniences down the line. Therefore, carefully going through property documents and ensuring it has a clean history will guard you against any financial or legal proceedings in the future. An EC document helps you obtain all relevant data about the property and acts as the ownership proof.
Moreover, it is an important document that you must produce when you apply for a home loan with a financial institution. Lenders assess this document to verify there are no ongoing disputes on the property before approving your loan request. With the digitization of the financial industry, you can easily avail of a non-encumbrance certificate online.
Have you obtained the no-encumbrance certificate? Are you ready to move into the house of your dreams? Whether you're purchasing a home or constructing one, you can enjoy a simple loan process and affordable interest rates with Tata Capital. Moreover, you can enjoy additional benefits like minimal documentation, easy repayment, and your preferred EMI period.
So, what are you waiting for? Visit our website and click on the 'Apply' button today!
17 June 2022
5 mins read
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