Encumbrance certificate - all you need to know about Encumbrance

An encumbrance certificate is necessary for multiple purposes, including a home loan.

Buying property can be taxing. You must research the property you like, evaluate whether you can afford it, and find the right lender for a home loan. Even if you manage to do all of it quickly, the volume of paperwork you must assemble can leave you drained.

Lenders demand many documents to assert your identity and repayment capability. An encumbrance certificate is one of the essential documents that lenders need to process your home loan request. Read on to know what it means.

What is an Encumbrance Certificate?

Encumbrance means a liability or a burden. While buying property, an encumbrance certificate shows that a property is free of liabilities. It shows that a property is free from legal and monetary charges. Legal charges could mean legal proceedings being carried out against the property, while monetary charges could be a loan still being paid.

Availing encumbrance is essential to conduct sales and get loans from lenders to prove that you do not have any existing loans.

How to get an Encumbrance Certificate?

An encumbrance certificate must be collected from a government authority. It can be done from the sub-registrar’s office from where the property is registered in most states. You will have to apply to the sub-registrar with the required documents. This could include proof of ownership, identity proofs, title deeds, etc. There could also be a charge payable for the same.

Once the application is made and the documents are verified, the government authority will go through the official records to find the necessary details. It might take 15 or more working days.

Once that is complete, an encumbrance certificate for the specified period will be issued with details of the transactions. If no transactions are shown, a nil encumbrance certificate will be issued.

What are the contents of an Encumbrance Certificate?

An encumbrance certificate is a comprehensive document about the things related to the transaction on a property registered under a sub-registrar. When you file for an encumbrance certificate, the officer will go through these transactions and inform you about the same.

But these certificates are usually specified for a specific time, and only the transactions in that time will be shown.

Additionally, some short term and small transactions do not require you to register by law in a sub-registrar office. Such transactions will also be excluded from the certificate.

Completion and occupancy certificates

A completion certificate and an occupancy certificate are often confused with an encumbrance certificate, but they have their differences. A completion certificate is issued to a builder or a developer by the government saying that the building’s construction is completed and it abides by the plan approved earlier.

This is necessary for the local government to allow occupancy in the building. For that, the authority will issue an occupancy certificate. It is required by law for a property that is newly built to be able to host people. 

Encumbrance Certificate for home loans

An encumbrance certificate shows that the property has no liability. It shows that the property has no other pending legal or monetary liability, including another loan, and is essential for lenders to be able to provide a home loan. But getting a home loan is easy once you get your hands on these documents.

Different home loan apps, including Metra Trust’s Loans app, offer a seamless and hassle-free process for applying for loans. The process is also fast, making the whole experience easier for you.

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Metra Trust or its affiliates to any licensing or registration requirements. Metra Trust shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.