Bengaluru: Illegal or undisclosed mortgaging of land used for apartment projects is emerging as a growing concern in the city, exposing homebuyers to prolonged legal disputes and financial uncertainty.In one such case on Anekal-Chandapura Road, residents of an apartment complex with 384 flats have spent years battling to secure ownership rights, after the land and several flats were allegedly mortgaged by the developer without the knowledge of buyers.“Under property laws, once apartments are sold, the land and common areas are meant to be transferred to a cooperative society or an association of apartment owners. However, governance failures and delays in forming legally recognised resident bodies often allow developers to retain control over land even after selling units,” an advocate working closely on the issue told TOI.Industry observers said this gap is frequently exploited. Developers sometimes create proxy or defective associations that can sign documents and facilitate loans, enabling the mortgaging of properties without the consent of buyers. Sources claimed thousands of crores of rupees are raised through such arrangements in cities across India.“Weak enforcement, delayed registrations, and administrative lapses allow builders to continue treating apartment complexes as their assets long after sales are completed. Financial institutions also sometimes approve loans against such properties despite the risks, leaving homeowners vulnerable if the developer defaults,” the advocate said.Rs 28cr loan raised in 2017The Anekal-Chandapura Road project illustrates how such disputes unfold. Residents allege that in 2017, the builder mortgaged 188 flats in the project to a private financing company to raise a loan of Rs 28 crore. However, nearly 100 of those flats had already been sold to buyers between 2013 and 2017, many of whom had also taken housing loans from banks. The transaction effectively created a double mortgage, with both individual buyers and the financier claiming financial interest in the same flats.Soon after the loan agreement, residents began receiving notices stating that their flats were mortgaged and that payments would need to be made to the financier to obtain a no-objection certificate (NOC).The situation escalated in 2020 when possession notices claiming rights over the project were pasted across the apartment complex after the outstanding loan reportedly rose to more than Rs 42 crore because of accumulated interest. Residents said they were asked to pay an additional Rs 8 lakh to Rs 10 lakh each to release their flats from the mortgage.Complaint to tribunal, ReraFearing that the apartments could be auctioned, the homeowners approached the debt recovery tribunal challenging the mortgage executed under the SARFAESI (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest) Act. Complaints were also filed before the Karnataka Real Estate Regulatory Authority (K-Rera).During the proceedings, the regulator found that only about half the project had been completed even though it was launched in 2013 with a promised completion timeline of 2014-15. K-Rera later ordered recovery of Rs 4.4 crore from the financier after finding that several unsold flats were transferred at a low price and resold at higher values without adjusting the gains against the outstanding loan.The mortgage on the project was eventually released in 2024 after the financier recovered part of the dues through collateral properties belonging to the builder.Registration woes continueHowever, the resolution did not fully end the difficulties faced by residents. Out of the 384 flats in the complex, 242 have been registered. But 142 buyers, who have already paid 90-95% of the cost of their homes, are still waiting for registration because construction remains incomplete.The regulator allowed the apartment’s cooperative society to take over the project and sell around 50 unsold flats to raise funds for completion. However, according to members of the society, progress has stalled because the builder has not handed over key documents, plans, and access to the remaining units.In 2025, Karnataka high court directed the builder to execute a conveyance deed transferring the project to the cooperative society within 120 days. According to residents, the order has not yet been complied with, forcing the society to initiate contempt proceedings. For many buyers who booked their flats more than a decade ago, the dispute has turned into a long legal battle to secure homes they believed they already owned.
