Usufructuary Mortgage: Definition, Benefits, and Considerations

Understand the concept of usufructuary mortgage, its benefits, and important considerations. Learn about key features and processes involved in establishing a usufructuary mortgage.
APPLY
Loan Against Property
APPLY
5 min
20 July 2024

Navigating the financial landscape of property mortgages can be complex, especially with various mortgage types available. One such type is the usufructuary mortgage, a concept that might seem intricate but offers unique benefits for both borrowers and lenders. Understanding its features and implications can help you make an informed decision when considering financial solutions like Bajaj Finserv Loan Against Property.

In this article, we will explore the definition of usufructuary mortgage, its key features, and the process of establishing one. We will also discuss the rights and responsibilities involved, the benefits, and important considerations before opting for a usufructuary mortgage. Finally, we will compare it with other types of mortgages to give you a comprehensive understanding of where it stands. This knowledge will empower you to make the right choice when leveraging property for financial gains, potentially through Bajaj Finserv Loan Against Property.

What is a usufructuary mortgage?

A usufructuary mortgage is a type of mortgage in which the borrower transfers possession of the property to the lender until the loan is repaid. The lender, in return, enjoys the income generated from the property, such as rent or profits, but does not own the property outright. This arrangement ensures that the lender's interests are secured while the borrower retains ownership, subject to the conditions of the mortgage.

Key features of usufructuary mortgage:

  • Transfer of possession: The property possession is transferred to the lender.
  • Income rights: The lender has the right to enjoy the income from the property.
  • Non-sale clause: The lender cannot sell the property but holds it until the debt is repaid.
  • Ownership retained: The borrower retains ownership of the property.
  • Fixed tenure: The mortgage is for a specific period agreed upon by both parties.

Process of establishing usufructuary mortgage:

Establishing a usufructuary mortgage involves several steps to ensure legal and financial clarity.

  1. Agreement drafting: Both parties draft a detailed mortgage agreement.
  2. Valuation of property: The property is assessed for its value and income potential.
  3. Registration: The mortgage agreement is registered with the relevant authorities.
  4. Transfer of possession: The borrower transfers possession of the property to the lender.

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Rights and responsibilities

In a usufructuary mortgage, both the borrower and the lender have specific rights and responsibilities:

  • Lender’s rights: The lender has the right to enjoy the property’s income and ensure its maintenance.
  • Borrower’s responsibilities: The borrower must ensure that the property remains in good condition and is returned as per the agreement.

Benefits of usufructuary mortgage

  • Secured loan: Provides security to the lender through possession.
  • Income utilisation: The lender benefits from the property's income.
  • Retention of ownership: The borrower retains ownership and future rights.
  • Non-dispossession: The lender cannot sell the property, ensuring future recovery for the borrower.

Considerations before opting for a usufructuary mortgage:

Before opting for a usufructuary mortgage, consider the following:

  • Property income potential: Ensure that the property generates sufficient income to cover the loan interest.
  • Legal implications: Understand the legal responsibilities and rights under the mortgage.
  • Future plans: Consider long-term plans for the property and its potential return.

Comparison with other types of mortgages:

Feature Usufructuary mortgage Simple mortgage English mortgage
Ownership Retained by borrower Retained by borrower Transferred to lender
Possession Transferred to lender Retained by borrower Retained by borrower
Income rights Lender enjoys income Borrower enjoys income Borrower enjoys income
Sale rights Lender cannot sell Lender can sell Lender can sell
Primary use Income-generating properties Various property types Property sold in case of default


A usufructuary mortgage offers a balanced approach for borrowers and lenders, securing the loan through possession while allowing income utilisation. It is crucial to weigh the benefits and considerations before deciding. For those seeking financial solutions leveraging property, Bajaj Finserv Loan Against Property provides a reliable and efficient option. By understanding usufructuary mortgages, you can make an informed choice that aligns with your financial goals and property plans.

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Frequently asked questions

What is the difference between a simple mortgage and a usufructuary mortgage?

The primary difference between a simple mortgage and a usufructuary mortgage lies in the manner of loan repayment and possession of the property. In a simple mortgage, the borrower agrees to repay the loan according to a fixed schedule, and the property ownership remains with the borrower, only serving as security. However, a usufructuary mortgage involves the transfer of property possession from the borrower to the lender until the loan is repaid. The lender can use and benefit from the property during this period.

What are the benefits of usufructuary?

A usufructuary mortgage can benefit both the borrower and the lender in several ways. The borrower can receive a loan without making immediate periodic repayments, and the possession of the property is returned after the loan has been repaid. The lender, on the other hand, can enjoy the possession and use of the property, often raising money from rents or profits from the property, providing a degree of security for the loan in case of default by the lender.

What is the limitation period for usufructuary mortgage?

As per the Limitation Act, 1963, the limitation period for enforcing payment for a mortgage or for foreclosure in India is usually 30 years. However, this period may start from different dates in different circumstances, such as from the date a notice is served, from the date of a personal covenant to repay or from the expiry of the mortgage term. It is recommended to consult with a legal expert to understand the specifics more precisely.

What is Section 62 of the TPA?

Section 62 of the Transfer of Property Act, 1882, mainly pertains to improvements and repairs made to mortgaged property. It discusses the rights and entitlements of a mortgagee (lender) who is in possession of a mortgaged property to carry out necessary repairs and improvements, and then subsequently recover the costs from the mortgagor (borrower), subject to certain conditions and limits prescribed in the Act. Legal advice should be sought, as understanding and interpreting these provisions require a comprehensive knowledge of the law.

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