Mortgages over immoveable property are arguably one of the most important and effective forms of security in any financial transaction. More often than not, and especially in cases of home loans, mortgages are created over properties which are yet to be constructed and delivered. It is therefore crucial to understand the nature of mortgages over future properties.
The legal provisions
Section 5 of the Transfer of Property Act, 1882, defines transfer of property as an act by which a living person conveys property, in present or in future, to one or more other living persons. Mortgage is defined under section 58 of the act as a transfer of interest in specific immoveable property to secure the repayment of money advanced.
The term transfer in section 58 would bear the meaning assigned to it under section 5. It is pertinent to note that in Jugalkishore Saraf v Raw Cotton Co Ltd, the Supreme Court clarified that the term “in present or in future” in section 5 qualifies the act of conveyance and not “property”.
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Deepti Mohan is a partner of Vidhii Partners and can be reached at deepti.mohan@vidhiipartners.com.
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