Bengaluru Homebuyers Face Legal Nightmare Over Undisclosed Land Mortgages
In Bengaluru, a disturbing trend of illegal or undisclosed mortgaging of land used for apartment projects is escalating, plunging homebuyers into years of legal conflicts and financial instability. This practice, where developers secretly pledge land and flats without buyers' knowledge, has become a significant urban concern, leaving residents fighting for ownership rights long after purchasing their homes.
Systemic Failures in Property Governance Exposed
According to property laws, once apartments are sold, the land and common areas should be transferred to a cooperative society or an association of apartment owners. However, governance failures and delays in forming legally recognized resident bodies often enable developers to retain control over the land even after selling units. An advocate closely involved with such cases explained that this regulatory gap is frequently exploited.
Developers sometimes create proxy or defective associations that can sign documents and facilitate loans, allowing them to mortgage properties without obtaining consent from buyers. Industry sources estimate that thousands of crores of rupees are raised through such arrangements across Indian cities, highlighting a widespread issue.
Weak enforcement, delayed registrations, and administrative lapses permit builders to continue treating apartment complexes as their assets long after sales are finalized. Financial institutions occasionally approve loans against these properties despite the inherent risks, leaving homeowners vulnerable if the developer defaults on payments.
Case Study: Anekal-Chandapura Road Project Dispute
The Anekal-Chandapura Road apartment complex, with 384 flats, serves as a stark example of how these disputes unfold. Residents allege that in 2017, the builder mortgaged 188 flats in the project to a private financing company to secure a loan of Rs 28 crore. Shockingly, 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.
This 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 intensified in 2020 when possession notices, claiming rights over the project, were pasted across the apartment complex after the outstanding loan reportedly ballooned to more than Rs 42 crore due to accumulated interest. Residents were asked to pay an additional Rs 8 lakh to Rs 10 lakh each to release their flats from the mortgage.
Legal Battles and Regulatory Interventions
Fearing potential auction of their apartments, homeowners approached the debt recovery tribunal to challenge the mortgage executed under the SARFAESI Act. Complaints were also filed before the Karnataka Real Estate Regulatory Authority (K-Rera). During proceedings, the regulator discovered that only about half of the project had been completed, despite a launch 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 low prices 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.
Ongoing Registration and Completion Woes
Despite this resolution, difficulties persist for residents. Out of the 384 flats in the complex, 242 have been registered, but 142 buyers, who have already paid 90-95% of their home costs, are still awaiting registration due to incomplete construction. The regulator permitted the apartment's cooperative society to take over the project and sell around 50 unsold flats to raise funds for completion.
However, progress has stalled because the builder has not handed over key documents, plans, and access to the remaining units. In 2025, the Karnataka High Court directed the builder to execute a conveyance deed transferring the project to the cooperative society within 120 days. According to residents, this order has not been complied with, forcing the society to initiate contempt proceedings.
For many buyers who booked their flats over a decade ago, this dispute has evolved into a protracted legal battle to secure homes they believed they already owned, underscoring the urgent need for stronger enforcement and transparency in Bengaluru's real estate sector.
