• Default on loan against property

Hi, I am planning on taking a loan against property. I have a few questions-
A) There is a choice of 2 properties I can mortage- 1) Commercial property with a tenant for the next 30 months 2) My house property- Which one would you think is ideal

B)The loan amount is only to the amount of 2.5 Cr. However the properties are worth 35 Cr and 50 Cr respectively- Is it ok to place as mortgage such properties for a small amount?

C) In case I'm unable to service the debt, what is the entire procedure for debt recollection/auction by banks and how long can this process go on for?
Asked 10 months ago in Property Law from Chennai, Tamil Nadu
Religion: Hindu
1) better mortgage commercial property 

2) never mortgage your own house 

3) if you fail to pay commercial property can be auctioned for recovery of dues 

5) but if your house is auctioned you would be literally on the roads 

6) if property is worth Rs 50 Cr don't mortgage it for partly 2 crores loan 
Ajay Sethi
Advocate, Mumbai
23240 Answers
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in case you want loan don't mortgage your house 
Ajay Sethi
Advocate, Mumbai
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A) Commercial property with a tenant would be a better choice.
B) Since you do not have any other properties of lesser value it is your decision to opt for either of the other two.
C) In case of default the bank can proceed to attach the mortgaged property under SARFAESI ACT and auction the property in order to recover the debts. This process does not take too long as banks have absolute powers now than before. 
Kiran N. Murthy
Advocate, Bangalore
765 Answers
50 Consultations
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1. The mortgagee would not be able to sell the mortgaged property if it is under lease which was created prior to the creation of mortgage. The tenant has the right to enjoy the leased property in accordance with the terms and condition of the lease irrespective of the creation of a subsequent mortgagee in favour of a bank or financial institution. So the bank may not even agree to provide loan against the property in which you have inducted a tenant.

2. It is most unwise to mortgage a property which is valued much higher than the loan amount. The bank will auction the property at a throwaway price if the loan is not repaid. There have been cases where properties valued at 100 crores have been sold for as low as 5 crores as the mortgagee is interested only in recovering its amount. 

3. If you are unable to repay the debt in entirety the bank will take possession of the property and proceed to auction it at a throwaway price, to preempt which you can apply for a stay order which may or may not be granted.
Ashish Davessar
Advocate, Jaipur
18102 Answers
448 Consultations
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Hi, it is better you can mortgage the property in commercial one, Suppose in case of default  your commercial property will go and dwelling house is in safe.
Pradeep Bharathipura
Advocate, Bangalore
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133 Consultations
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A) There is a choice of 2 properties I can mortage- 1) Commercial property with a tenant for the next 30 months 2) My house property- Which one would you think is ideal
If at all you want to mortgage, you can go for your commercial property 




B)The loan amount is only to the amount of 2.5 Cr. However the properties are worth 35 Cr and 50 Cr respectively- Is it ok to place as mortgage such properties for a small amount?
It is not advisable for mortgaging the property for such big value when the loan amount shall be hardly anything compared to its own value.




C) In case I'm unable to service the debt, what is the entire procedure for debt recollection/auction by banks and how long can this process go on for?
If it is a mortgage case, they may even invoke sarfesi act, so better do not give room for the loan to become NPA due to which your high end value of property shall hardly remain with you if sarfese act is invoked.for collection of default payments.
T Kalaiselvan
Advocate, Vellore
14026 Answers
127 Consultations
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