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The term real estate is defined as any immovable property like land and buildings, tangible assets. Though real estate is a tangible asset, the commercial banks do not regard them suitable security for advancing loans. Banker’s reluctance to accept real estate’s as security is largely due to certain practical difficulties and legal complications.

Inspection of the Register of Mortgages to ascertain the title of the owner to the property to be mortgaged is necessary so expenses are to be incurred and much time is spent. The problem of establishing the right of ownership is extremely difficult in case of agricultural land because land records are not properly maintained. Restrictive laws do not permit proceeding against defaulters, who are agriculturalists.

In the absence of ready market, real estate’s are not considered easily marketable assets and the funds of the banker remain unrealized for a long time. The valuation of property is a difficult problem. Preparation of pret immobilier deed and its registration takes time and expenses are incurred in the form of Stamp Duty. Thus, much cost is involved in creating a charge on real estates in favor of the banker. Simulation pret cuts down the interest rates favoring the mortgagee.