Yes. You can get a loan from the bank to purchase an immovable property by using the same property as the collateral/security. This practice is widespread when people buy residential properties in India. Home loans are generally approved on the basis that the prospective home is the collateral. Such loans fall under the definition of mortgage loans1. Commonly, when someone seeks a mortgage from a bank, they bind themselves to pay the loan, without delivering the possession of the mortgaged property, and agree that if they fail to repay the amount, the bank has the right to claim the mortgaged property and use it to settle the loan. Such mortgaged properties claimed by the creditors are often sold off in auctions as ‘foreclosed’2 or ‘distressed’ properties under the SARFAESI Act.0
- Section 58 of the Transfer of Property Act, 1882.
- Foreclosure of property is dealt with under Section 67 of the TP Act and also the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002