A khata is the municipal record identifying who is liable for property tax on a given property. In Bengaluru, an A-Khata property is fully compliant with municipal regulations and building byelaws. A B-Khata property sits on a secondary register where tax is collected, but the property does not carry the same regulatory standing.
The gap matters enormously when you need financing, and it catches a lot of buyers by surprise late in a transaction.
Why lenders hesitate
A lender's security is only as good as its ability to enforce against the asset. Where a property's regulatory status is uncertain, so is the enforceability of the mortgage, and so, potentially, is the resale market that would determine recovery.
The result is a spectrum rather than a flat refusal. Many large banks decline outright. Housing finance companies and NBFCs frequently do fund these properties, but at a lower loan-to-value and a somewhat higher rate, reflecting the additional risk they are taking.
What changes in the terms
- Funding ratio is typically lower than for an equivalent A-Khata property
- Rates run above standard home loan pricing, though still far below unsecured credit
- Tenures may be shortened relative to a comparable compliant property
- Legal scrutiny is more intensive, and the technical valuation more conservative
What to verify before you commit
Do this work before you pay a meaningful advance, not after. The single most expensive mistake in this category is committing to a purchase and only then discovering that no lender will fund it at the price agreed.
- The complete title chain, traced back far enough to establish clean ownership
- An encumbrance certificate covering an adequate period
- The current khata extract, and whether a conversion route exists for the property
- Whether the land has been converted from agricultural use, where relevant
- Approved plans, and whether what is built actually matches them
- Property tax paid receipts, current and continuous
Is it worth buying one?
Often, yes: that is precisely why the market exists. B-Khata properties are cheaper than comparable A-Khata ones, frequently in genuinely good locations, and where conversion is achievable the gap between purchase price and eventual value can be substantial.
But the case rests on going in with clear eyes: a larger down payment, a slightly higher rate, more legal diligence, and a realistic view of the conversion path. Where those conditions are met, financing is available. The difficulty is usually finding the lender who is currently active on such cases, which changes more often than most buyers realise.