Freehold vs GPA
8 months ago
Our bank is forcing us to give them GPA in order to get home loan, even though we have submitted all the necessary documents and our soon to be property has already acquired the status of freehold. So, we want to know: is GPA mandatory in this situation?
A.Dear Client,
Bank or NBFC usually did not approve home loans for purchasing an immovable property through GPA even if it is a freehold property because a GPA cannot transfer the title or interest of an immovable property in favor of the purchaser who applied for a home loan against the said immovable property. In its judgment in 2011, The Supreme Court made it clear that a GPA cannot be used to transfer legal ownership of the real estate. In addition, the Court determined that a power of attorney is only an agency constituted in favor of the guarantee on behalf of the guarantor. When a property is purchased through a GPA, it does not result in the transfer of ownership rights from the seller to the buyer. The GPA merely grants authority to the buyer to act on behalf of the property owner. So, you need to discuss this issue with the concerned Bank to assess the necessity behind the demand of GPA for sanctioning a home loan against a freehold property and in case verbal communication fails you can represent your concern in writing to the Bank and its higher Authority including Banking Ombudsman to get a resolution in the matter.
Bank or NBFC usually did not approve home loans for purchasing an immovable property through GPA even if it is a freehold property because a GPA cannot transfer the title or interest of an immovable property in favor of the purchaser who applied for a home loan against the said immovable property. In its judgment in 2011, The Supreme Court made it clear that a GPA cannot be used to transfer legal ownership of the real estate. In addition, the Court determined that a power of attorney is only an agency constituted in favor of the guarantee on behalf of the guarantor. When a property is purchased through a GPA, it does not result in the transfer of ownership rights from the seller to the buyer. The GPA merely grants authority to the buyer to act on behalf of the property owner. So, you need to discuss this issue with the concerned Bank to assess the necessity behind the demand of GPA for sanctioning a home loan against a freehold property and in case verbal communication fails you can represent your concern in writing to the Bank and its higher Authority including Banking Ombudsman to get a resolution in the matter.
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A.Dear Client,
A general Power of Attorney (GPA) is sometimes requested by banks or financial institutions as an additional measure of security when providing loans, especially in cases involving property transactions. A GPA essentially gives someone the legal authority to act on your behalf in certain matters, which includes handling your property transactions.
The order passed by the Supreme Court (SC) in 2011 categorically stated that the GPA is not an instrument of transfer when it comes to right, title, and interest in an immovable property. The Court further held that power of attorney is only an agency created in favor of the recipient, also known as grantee, on behalf of the grantor. Moreover, even an irrevocable power of attorney does not have the effect of transferring title to the recipient. Therefore, GPA is not valid for the sale of a property. Transactions related to an immovable property can only be done by way of stamped and registered conveyance deeds, as applicable under the respective State government Act.
However, whether a GPA is mandatory in your specific situation can depend on the bank's policies, the property's legal status, and the jurisdiction you're in. It's common for banks to require additional documentation to safeguard their interests, and they might request a GPA to ensure that they have a way to manage the property in case of default on the loan.
In some cases, the bank might have specific internal policies that require a GPA as part of the loan application process. It's also possible that the bank might view a GPA as an additional layer of protection to ensure proper handling of the property's documentation and transactions.
If your property has already acquired freehold status and you've submitted all necessary documents, you might consider discussing your concerns with the bank's loan officer or representative. They should be able to provide you with a clear explanation of why they are requesting a GPA and whether there are any alternatives or ways to address the situation.
Thanks
A general Power of Attorney (GPA) is sometimes requested by banks or financial institutions as an additional measure of security when providing loans, especially in cases involving property transactions. A GPA essentially gives someone the legal authority to act on your behalf in certain matters, which includes handling your property transactions.
The order passed by the Supreme Court (SC) in 2011 categorically stated that the GPA is not an instrument of transfer when it comes to right, title, and interest in an immovable property. The Court further held that power of attorney is only an agency created in favor of the recipient, also known as grantee, on behalf of the grantor. Moreover, even an irrevocable power of attorney does not have the effect of transferring title to the recipient. Therefore, GPA is not valid for the sale of a property. Transactions related to an immovable property can only be done by way of stamped and registered conveyance deeds, as applicable under the respective State government Act.
However, whether a GPA is mandatory in your specific situation can depend on the bank's policies, the property's legal status, and the jurisdiction you're in. It's common for banks to require additional documentation to safeguard their interests, and they might request a GPA to ensure that they have a way to manage the property in case of default on the loan.
In some cases, the bank might have specific internal policies that require a GPA as part of the loan application process. It's also possible that the bank might view a GPA as an additional layer of protection to ensure proper handling of the property's documentation and transactions.
If your property has already acquired freehold status and you've submitted all necessary documents, you might consider discussing your concerns with the bank's loan officer or representative. They should be able to provide you with a clear explanation of why they are requesting a GPA and whether there are any alternatives or ways to address the situation.
Thanks
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