Foreclosure laws in Pakistan

Banks and DFIs in Pakistan are not wrong when they argue that the mortgage and foreclosure laws need reforms so they can get some surety that they will get their money back. The law has some important issues that need to be addressed before one can blame the financial institutions for not helping in dealing with the housing crisis in Pakistan.
If the government wants to increase the housing finance to 10 percent of GDP over the next ten years, it needs to give serious consideration to the matter of reforming the current foreclosure laws in the country. The list of these reforms is very long, but few of them are as follows:
The record keeping system of immovable properties, at present, is weak. The record registered mortgages are entered on "document to document" basis, and there is no entry against the previously registered sale contract.
Even though there is a system of non-encumbrance certificate (NEC) but when a bank seeks the NEC that very often is issued by the registration authority (in Punjab) on the basis of an affidavit provided by the property owner and not on the a basis of any search.
Even if there is a search it only extends up to the period of the last registered deed and if there has been a mortgage prior to that, it would not have been disclosed in the search. That is why the country needs a system of consolidating and computerizing immovable property record from all over Pakistan at one place.
Once a mortgage has been created by the bank, the mortgagor should not be in a position to create a third party interest in the mortgaged property without written permission of the mortgagee. Where the property is already in possession of a tenant, the mortgage bank should examine the terms of tenancy.
This matter was challenged at LHC and the court declared it illegal but the apex court suspended that verdict, and the final judgment is still pending. The government should make efforts to get the final judgment as soon as possible.
Also the country needs a uniform immovability law all over Pakistan, especially with regards to revenue records, transfer fees, and registration. For example to transfer immovable property through a registered sale in Sindh the expense is 7 percent of the value of the property.
However, in Baluchistan similar practice can cost 10 percent of the value of the property. Punjab and KPK also have different prices. Also, Military or Cantonment properties laws and rules are different. This multi-laws framework creates complications in the banking system.
The sale of property through general power of authority should be prohibited because it is one of the main reasons for default. According to the proposed law, a power of attorney should be authenticated by the Sub-Registrar of the area where the property is situated or the principal resides. However, this system is not followed and many documents have been and still being registered by the registration authorities on the basis of unauthenticated power of attorney.
On a related note, banking court judges are not properly trained to deal with the delicate and technical issues of the banking sector. These judges are appointed from judiciary while they already working as session judges. It is recommended that the judges of banking court should come from the banking court lawyers. Also, there is a dire need to establish banking courts at district level to release the pressure at one place.
These recommendations are part of the whole reform structure which both the industry experts and banking sector lawyers alike are pressing. It is high time for the government to take actions on these important reforms because unless reforms are implemented, the success of Prime Minister Housing Scheme would be in jeopardy.