BENGALURU: The illegal or undisclosed mortgaging of land related to apartment projects is raising alarms in the city, putting homebuyers at risk of enduring legal battles and financial instability.
One notable case on Anekal-Chandapura Road sees residents of a 384-flat complex struggling for ownership rights after the developer allegedly mortgaged the land and several units without informing the buyers.
According to an advocate actively engaged in the matter, “Under property regulations, when apartments are sold, the land and common areas should be handed over to a cooperative society or an association of apartment owners. However, governance shortcomings and delays in establishing recognized resident bodies allow developers to maintain control over the land even after unit sales.”
Industry experts indicate that this vulnerability is often exploited. Developers sometimes create fake or ineffective associations to sign necessary documents and acquire loans, permitting the mortgaging of properties without buyer consent. Reports suggest that such tactics have generated enormous sums across cities in India.
The advocate added, “Weak enforcement, slow registrations, and administrative errors enable builders to treat apartment complexes as their own long after units are sold. Financial institutions occasionally approve loans against these properties despite the associated risks, leaving homeowners exposed if developers default.”
Rs 28 crore loan secured in 2017
The Anekal-Chandapura Road incident showcases how these disputes arise. Residents claim that in 2017, the builder mortgaged 188 flats to a private lender to secure a Rs 28 crore loan, even though nearly 100 of those flats had been sold to buyers between 2013 and 2017, many of whom secured home loans through banks. This created a double mortgage scenario where both buyers and the financier laid claim to the same properties.
Shortly after finalizing the loan agreement, residents began receiving notifications asserting that their flats were mortgaged and that they needed to pay the financier to obtain a no-objection certificate (NOC).
The situation worsened in 2020 when possession notices were posted throughout the apartment complex, claiming rights to the project after the outstanding loan reportedly exceeded Rs 42 crore due to accrued interest. Residents stated that they were being asked to pay an additional Rs 8 to 10 lakh each to release their flats from the mortgage.
Grievances lodged with tribunal and RERA
Worried about potential auctions of their apartments, homeowners appealed to the debt recovery tribunal disputing the mortgage executed under the SARFAESI (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest) Act. Complaints were also submitted to the Karnataka Real Estate Regulatory Authority (K-RERA).
During the hearings, it came to light that only about half of the project had been completed despite its initiation in 2013 with a promised completion date of 2014-15. K-RERA ordered the recovery of Rs 4.4 crore from the financier, determining that numerous unsold flats were transferred at low prices and then resold at higher rates without crediting the profits against the outstanding loan.
Ultimately, the mortgage on the project was lifted in 2024 after the financier recovered part of the debt through collateral properties owned by the builder.
Registration challenges persist
However, this resolution did not eliminate the challenges faced by residents. Of the 384 flats in the complex, only 242 have been registered. 142 buyers, who have paid 90-95% of their homes’ costs, are still awaiting registration due to incomplete construction.
K-RERA permitted the apartment’s cooperative society to take charge of the project and sell around 50 unsold flats to fund completion. Nonetheless, society members reported stalled progress due to the builder’s failure to provide essential documents, plans, and access to the remaining units.
In 2025, the Karnataka High Court instructed the builder to execute a conveyance deed transferring the project to the cooperative society within 120 days. According to residents, this order remains unfulfilled, leading the society to initiate contempt proceedings. For many buyers who reserved their flats over a decade ago, this dispute has evolved into a prolonged legal struggle to secure homes they believed they had already acquired.
