Encumbrance

Yes. After clering the loan, the property can be purchased and having title of the property in the revenue records. Until the the old owner is the responsible to clear the loan and can be sold the property. The banker will issue loan clearance certificate. After obtaining loan clearance certifcate, the property can be exchanged.

Thank you for your response Mr.Acharya.  I still had some doubts about how this works - You mentioned that the bank issues the loan clearance certificate when the original owner clears the loan.  But, my question is slightly different - I am trying to understand what happens if I have already purchased the property from the original owner and after the purchase has been completed, I come to know about the fact that there is an encumbrance that the original owner did not clear (for example, the original owner had taken a loan from the bank on the property and that loan has not been cleared yet).  Am I legally responsible for clearing that loan now since I own the property now?  Or will the bank go after the previous owner to collect the outstanding debts?