Maharashtra government land loan rules will now allow owners of homes, flats and shops built on Class II occupancy land or government-leased plots to mortgage those properties with banks and financial institutions, subject to approval from the district collector and payment of a prescribed mortgage fee.
The clarification by the state Revenue Department applies to government land granted for residential, industrial and commercial use. Property holders will be able to seek loans against the buildings or premises on such land, but the underlying tenure of the land will not change as a result of the mortgage.
After the mortgage transaction, the land will continue to remain classified as Class II occupancy land or as government-leased land. This means the permission to create a mortgage does not convert the property into unrestricted or Class I tenure, according to the details reported by Sakal – Pune.
For residential properties, including land or flats granted for residential, educational, medical and cooperative housing purposes, the mortgage fee will be 0.25% of the loan amount. A fee of 0.50% of the loan amount will apply to industrial and commercial properties.
The prescribed fee must be paid in advance. The district collector’s office will issue permission for the mortgage after the payment is made. The requirement for prior approval places the collector’s office at the centre of the lending process for properties held under these government land arrangements.
The Revenue Department’s clarification also addresses legal uncertainty surrounding the validity of mortgage charges. According to the report, amendments to the land revenue law have provided a legal basis for the process and were intended to resolve court disputes relating to mortgage fees.
For property owners, the decision opens a route to formal, property-backed borrowing that was previously constrained by the conditions attached to Class II and government-leased land. Homes, flats and shops on such land may have had usable market value but could not be mortgaged through a straightforward process without the relevant government permission.
The decision therefore separates two issues that are often treated as one in property transactions: the right to use a building or premises as security for a loan, and the legal status of the land on which it stands. The former is now permitted through the prescribed process, while the latter remains unchanged.
Banks and other financial institutions will still need to examine the title, tenure conditions, collector’s permission and payment of the applicable fee before accepting a property as security. The clarification does not state that every such property will automatically qualify for a loan; it establishes the route through which mortgage permission can be obtained.
The next step for eligible property holders is to approach the relevant district collector’s office, pay the applicable fee in advance and obtain permission before completing the mortgage with a bank or financial institution.
