Homebuyers in Bengaluru are increasingly finding themselves trapped in complex legal disputes after developers allegedly mortgaged apartment project lands without informing buyers. The issue has raised serious concerns about transparency, regulatory enforcement, and due diligence in India’s residential real estate market.
Undisclosed Mortgages Leave Buyers in Limbo
A recent case in Bengaluru highlights how such practices can leave homeowners vulnerable long after they have purchased their flats. In an apartment complex located on Anekal–Chandapura Road, residents of a 384-unit project have been fighting for years to secure clear ownership of their homes after the developer allegedly mortgaged the land and several flats without their knowledge.
According to reports, the developer raised a loan of about ₹28 crore in 2017 by mortgaging 188 flats in the project. Shockingly, nearly 100 of those units had already been sold to buyers between 2013 and 2017, many of whom had also taken housing loans from banks. This resulted in a double mortgage situation, where both individual buyers and the financier held financial claims over the same properties.
Soon after the loan agreement, residents began receiving notices stating that their flats were mortgaged and that additional payments would be required to secure a No-Objection Certificate (NOC) from the financier.
Financial Burden on Residents
The situation escalated further when the developer allegedly defaulted on the loan. With accumulated interest pushing the outstanding amount to over ₹42 crore, the financier demanded payments from residents to release their homes from the mortgage. Homeowners were reportedly asked to pay ₹8–10 lakh each to free their flats.
Fearful that their homes could be seized or auctioned, residents approached the Debt Recovery Tribunal and the Karnataka Real Estate Regulatory Authority (K-RERA) for relief.
Regulatory Intervention but Limited Resolution
During proceedings, K-RERA found that only about half of the project had been completed, despite being launched in 2013 with a promised completion timeline of 2014–15. The regulator later ordered the recovery of ₹4.4 crore from the financier, noting that some unsold flats had been transferred and resold without adjusting the gains against the outstanding loan.
Although the mortgage was eventually released in 2024 after the financier recovered dues through collateral properties owned by the builder, many issues remain unresolved.
Out of the 384 flats in the complex, only 242 have been registered, while 142 buyers are still waiting for registration because construction remains incomplete and necessary documentation has not been handed over.
Legal Delays Continue
To resolve the situation, authorities allowed the apartment’s cooperative society to take over the project and sell around 50 unsold units to raise funds for completing construction. However, progress has stalled as the developer has yet to transfer critical documents and access to 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, but residents say the order has not yet been complied with, forcing them to initiate contempt proceedings.
A Wider Industry Concern
Industry observers note that such cases expose a systemic gap in property governance. Under property laws, once apartments are sold, the land and common areas are meant to be transferred to an association of apartment owners. However, delays in forming legally recognised resident bodies often allow developers to retain control over the land and raise loans against it.
Experts warn that weak enforcement, delayed registrations, and lapses in due diligence by financial institutions can enable such situations, leaving homebuyers caught between lenders and developers.
The Need for Greater Transparency
The case underscores the need for stricter compliance with real estate regulations and stronger due diligence mechanisms for both lenders and buyers. Clear disclosure of project mortgages, timely transfer of land titles to owner associations, and tighter regulatory oversight are increasingly being seen as essential to protect homebuyers from similar legal and financial risks.
For many residents who booked their homes over a decade ago, the dispute has turned into a prolonged struggle to secure ownership of properties they believed they already owned.
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