Buying property with existing loan dues: the closure, the documents and the order of payments

Buying property with existing loan dues on it has a fixed shape. The seller's bank holds his original papers until it is paid, so part of your price must reach that bank before the papers can reach you, and the order in which the money moves decides whether you are safe. Pay the whole price to the seller on his promise to close the loan, and you have bought a flat whose title deeds sit in a bank's custody, pledged against his debt. Having found lenders following divergent practices that led to grievances and disputes, the Reserve Bank of India set a rule on 13 September 2023: originals back within 30 days of full repayment, or Rs 5,000 a day to the borrower for any delay the lender causes. The borrower is the seller, not you.

What you need before you start#

Pune recorded 13,557 property registrations in September 2025, 23 percent more than a year earlier, with Rs 523 crore paid in stamp duty, according to Knight Frank India. No count tells you whether your seller still owes a bank. These papers do:

• The payoff letter from the seller's lender: the amount that closes the loan, valid to a stated date.
• The lender's written list of the originals it holds.
• Your trace of the chain of title, every sale back to the builder's first agreement.
• A fresh encumbrance certificate and a CERSAI search, for registered transactions and for lenders' security interests that may never reach the sub-registrar.
• The seller's PAN and a signed declaration of his residential status for the tax year of the sale.
• The society's no-dues certificate in the seller's name.

The order, step by step#

The letter, and the list that matters more#

The payoff letter gives a number and a date. Interest keeps running, so the number closes the loan only on that date: register inside its validity, or get a fresh letter.

The list matters more: it is the only paper that shows, before the money moves, what the bank will hand back. Read it against the chain: the builder's first agreement and every later sale deed. What you want to see is every link, each marked as an original. The red flag is a link missing, or listed only as a copy. It may mean an original was lost, which the bank must put right, or that it never reached the bank, which the seller must explain before you sign.

Then hold the letter against the registries: a charge it does not cover, such as a second facility on the same flat, survives the payoff. The seller's papers may not show the developer's own charge. If the building is registered with MahaRERA, its free project page on ReraGenie lists the charges declared on the project, with the lender and amount where filed. A blank answer there is not a clean one.

The day the money moves#

The cleanest version has the seller repay from his own funds and collect his originals before you pay anything. Where he cannot, the price pays the bank, and the order on the day carries the protection.

Your lender issues two payments: the payoff amount straight into the seller's loan account, and the rest of the loan to the seller. The red flag is any request to route the bank's share through the seller: it moves the one payment that frees the papers out of your control. The appointment is walked through in registration day at the sub-registrar.

An illustration, not a case: a resident seller, a Rs 80 lakh price, Rs 45 lakh owed on his payoff letter, and a buyer borrowing Rs 60 lakh.

The deduction is 1 percent of the whole Rs 80 lakh, including the Rs 45 lakh paid to the bank, and since the bank's figure is fixed, it comes out of what the seller receives directly. Section 393(1) of the Income-tax Act, 2025, formerly section 194-IA, sets it at 1 percent of the price, or of the stamp duty value if higher, for a resident seller where that figure is Rs 50 lakh or more; the filing is in TDS on your flat purchase. A seller not resident for the tax year of the sale follows a different rule, set out in buying from an NRI seller. Stamp duty and the registration fee are separate: see stamp duty and registration charges in Maharashtra.

The thirty days after#

Once the loan is paid off, the clock is the seller's lender's. Under the Reserve Bank's direction it must release all the originals, and remove the charges it registered with any registry, within 30 days of full repayment, and owes the borrower Rs 5,000 for each day of delay it causes. If an original is lost or damaged, it gets 30 more days to arrange duplicate or certified copies, so compensation runs only after 60 days in all. Section 25 of the SARFAESI Act, 2002 separately requires it to report the satisfaction to the Central Registrar within 30 days, so that it is entered in the CERSAI register.

What you want to see inside the month: the closure letter, the originals with your lender, and a fresh CERSAI search showing the satisfaction. The red flag is silence past the 30th day.

The society comes last#

The society acts on a registered document, so it comes last. It will want the deed and its Index II, the seller's surrendered share certificate, transfer forms signed by both of you, a no-dues certificate and proof that the mortgage was released. If the share certificate is not on the bank's list, ask where it is before you pay. The committee's timeline and the ceiling on its fee are in the share certificate and society membership.

An analogy: the necklace in the gold-loan locker#

If a friend sold you a necklace sitting in a bank's gold-loan locker, you would not hand him the full price and wait. You would go to the counter together, pay the bank what he owes out of the price, watch the necklace come out, and hand him the rest. A flat with a home loan works the same way, except that this locker may take up to 30 days to open, so the money moves first and the papers follow.

Priya and Arjun's six weeks#

Priya and Arjun (illustrative, as our stories always are) came back from their resale or new booking weekend with a spreadsheet tab for the Sunday flat: 2022-vintage, two buildings from the developer's new tower in the same Pune society, its owner relocating to Singapore, keys in six weeks, priced 4 percent below the developer's sticker. They had traced its chain back to the builder: the builder's registered agreement for sale to a first buyer in 2019, his gift of the flat to his daughter in 2021, her sale to the current owner in 2022, and the society transfer. What the chain could not show was the loan: the owner still owed his bank, and the originals sat with it.

Arjun laid the sequence out in columns. No single column was the snag; the dates were. Their rule, that no money moves until the checks are green, could not hold, because the check that mattered most, the originals in hand, could only turn green after the money moved, on the bank's clock of up to 30 days. The keys could come inside six weeks and the papers up to a month after the payoff, when the seller might already be in Singapore.

The tax column added a question. A resident seller meant a 1 percent deduction, a non-resident one a different rule, and his status was a count of days across the whole tax year that could not be settled on the day the money moved. Priya made the seller's signed declaration of his residential status, read by their own chartered accountant, a condition of any token.

They did not buy it. They booked the developer's new tower: Rs 90 lakh, under construction, registered in both their names, the home loan sanction reissued at Rs 72 lakh. The resale was cheaper on the spreadsheet; the order decided it. In the tower every check they cared about could run before their money moved, and in the resale the one that mattered most could only close after. What they kept was the habit of asking for the list before the price. Names and numbers in this story are illustrative.

What the Rs 499 report reads, and what it cannot#

The seller's loan is in no MahaRERA filing. It lives in his bank's records and in CERSAI, so the Rs 499 ReraGenie buyer report does not read it. It reads the project the flat sits in, which a resale buyer inherits: land and title as five questions, including whether the project land is mortgaged as filed and what the legal title report concludes, with the exceptions it attaches; the project's complaints and cases in plain words; and the red flags beside the checks that came back clear, each with its filing date. The filed documents come as a ZIP. See what the buyer report covers before you agree a price.

The checklist#

• Get the payoff letter and the list of originals before you agree terms.
• Match the list to the chain, and the letter to the encumbrance certificate and CERSAI.
• Take the seller's PAN and residential status declaration to your own chartered accountant.
• Register inside the payoff letter's validity.
• Have your lender pay the seller's lender directly, never through the seller.
• For a resident seller, withhold 1 percent of the whole price and file Form 141 within 30 days of the month's end.
• Within 30 days, collect the closure letter, the originals and a CERSAI search showing the satisfaction.
• Take the deed, Index II, the share certificate and proof of release to the society.

This article is educational and not legal advice. For a dispute, consult a lawyer who practices before your state's RERA.