LOAN ZONE: Mechanics of Power of attorney

Q. Can one take a home loan on power of attorney? amarjit singh oberoi, chandigarh.

A. Power of Attorney (POA) is a legal document that grants authority an individual to act on behalf of another in legal, financial, or property matters.

The person creating the POA is called the “principal.” The person being appointed with decision-making power is called an “agent”. This document should be notarised to be legally valid. For NRIs, the POA might require certification from current residing country.

The Supreme Court of India has delivered a landmark judgment on the scope and validity of power of attorney (POA) documents. The Apex court held that a POA can’t be used to transfer immovable property without the principal’s express consent and execution of the necessary documents.

Buying property through a GPA can be risky as it doesn’t transfer actual ownership.

Your steps should be:

• Ensure a registered GPA: Verify the General Power of Attorney is registered within the legal timeframe.
• Get the property registered in your name: Ask the original owner to execute a sale deed and get it registered.

Housing loan on POA

Bank loans in India require a power of attorney approval, but the requirements may vary as each bank has its criteria.

The bank cannot provide direct loans to a power of attorney. In contrast, you can apply by power of attorney for a home loan if you are a homeowner. NRIs usually use this method to get a loan approved.

The property for which the loan is being sought must be legally owned by the individual granting the power of attorney. The owner must be an NRI or an Indian resident living abroad.

POAs are typically used by those who cannot manage their affairs, either due to mental incapacity or physical absence. This may be short-term (for example, due to illness or travel) or long-term (like with a severe brain injury or a coma), depending on the type of POA.

Legal Considerations and Precautions

• Specific Authority: The POA should explicitly mention the authority granted to the agent for loan-related activities, including borrowing, negotiating terms, and signing agreement, ensuring that the principal’s interests are protected.
• Valid identification proof: Address Proof, Income Proof, Loan Application Form, Property Valuation Report.
• Property Documents: Copies of property documents, including sale deed, title deed, and other ownership-related documents, must be submitted. These documents serve as collateral for the loan.
• POA Revocation Clause: In some cases, lenders may require a specific clause in the POA document, allowing them to revoke the attorney’s authority in case of default or other specified conditions. The principal retains the right to revoke the POA at any time, which would subsequently terminate the agent’s authority to act on their behalf in loan matters.
• Additional Documents: Depending on the lender’s requirements and the specifics of the loan application, additional documents may be requested.

The writer is retd Chief Manager, SBI