The legal way, the safest way

Buying a house is definitely an investment for lifetime. Your new house will be your most prized possession. Therefore, before buying a new home you should not only be vigilant enough but also take right advice before taking the final call. When it comes to the legality of a property it becomes difficult as whom to trust to. So, to give you the right guidance and help you in all the legal matters related to your property, we provide you some of the best people in the field, straight from their desk.

Mr. Ajit Jakhadi, Advocate High Court, Mumbai

Mr Ajit is a legal advisor to Non – Resident Indians, persons of Indian origin, overseas citizen of India and foreigners for buying, selling and renting immovable property in India and Foreign Exchange Management Laws. He is handling civil litigation in Mumbai High Court, which includes various disputes against the government, property laws, arbitration act, tenancy laws and banking laws. He is practicing Civil law in Bombay High Court on its original side since the year 1979. He has appeared in number of important cases including Constitutional matters in the Hon’ble High Court, Bombay and Hon’ble Supreme Court of India.

Mr. Ajit has delivered lectures on Indian Property Laws in Dubai (U.A.E.), on Foreign Exchange Management in New York (US), Durban (South Africa), London (U.K.) and Singapore. He has also been a guest speaker on EBC radio, New York, where he conducted Q & A sessions for NRIs, PIOs and foreigners. He has also written a guide for NRIs, PIO’s and foreigners for acquisition of property in India, Foreign Exchange Law and precautions to be taken while buying and selling properties in India.

Feel free to contact him at:

Office: 8, D.G. Chambers, Above Dwarka Hotel, Nagindas Master road, Fountain,

Mumbai – 400 023.

Tel: +91 222 490 4062 , +91 9821148620

Email: jakajit9@yahoo.co.in

Mr. A.R. Gupta, Senior Partner, A.R. Gupta & Associates, Ahmedabad

Mr. A. R. Gupta, Senior Advocate is a law graduate from Delhi University and has been practicing in India since last 30 years. He has vast experience in matters pertaining to land, property, documentations, corporate and SEBI, commercial disputes, IPR, arbitration, international laws, civil disputes, constitutional matters and corporate frauds etc.

Mr. Gupta along with other partner Mr. Aditya Gupta regularly practices in Gujarat High Court as well as Supreme Court of India. Mr. Gupta heads the law firm A. R. Gupta & Associates which has its main office in Ahmedabad while branch offices are in Delhi and Mumbai.

Feel free to contact him at:

Ramnath House, Shreyash Colony,

Stadium Circle, Navrangpura,Delhi office: 65, LGF, World Trade Centre, Barakhambha Avenue, Connaught Place,

New Delhi-110001.

Tel: +91-79-26562406/07/09|+91-79-26562408

Mobile: +919825010679

Email: argupta50@yahoo.com

Web: www.argupta.com

Mr. Varun Singh, Advocate, Delhi

Mr. V.K. Singh, a young, vibrant and dynamic lawyer is a B.Com Graduate from Delhi University, LLB from Faculty of Law and Diploma in Alternative Dispute Resolution (ADR) from Indian Law Institute. He has further studied Intellectual Property Rights, International Trade and Business Laws (ISIL), European Law (University of Lisbon, Portugal & ISIL). He had the privilege to work as a trainee with Human Rights Law Network and with Senior Advocate Shri P.P. Malhotra additional Solicitor General of India. Varun Singh has worked with DLF as Legal Assistant Manager and has vast exposure in corporate law. He has intense experience in handling corporate and civil litigation of DLF and advised the Company in their legal affairs and in solving real time problems. While working with DLF he had the opportunity to deal with registration of sale deeds/ lease deeds, due diligence of properties, drafting and vetting of contracts, agreements, MOU and joint ventures. He has also gained experience in drafting of SLP, briefing Senior Advocates and appearing before the Supreme Court of India.

Feel free to contact him at:

A 102, Vishrantika Apartment Sector 3, Plot no. 5A, Dwarka,

New Delhi - 110075.

Tel: +91 9873717331

Mail: singvlawyer@rediffmail.com

Buying a property in India is a particularly demanding task with several possible hurdles along the way such as inexperienced brokers, title defects, complicated tenancy laws, the condition of the property itself, and financing, to name just a few. It is therefore important that the entire procedure be dealt systematically to reduce the hassles that accompany it.

Identifying a Realtor

A realtor can assist in locating and evaluating the right property, providing useful market information and resources, and eventually guiding the buyer through the whole process until the purchase is complete. However it is essential that the buyer proceeds cautiously and chooses a broker who is experienced and knowledgeable about the market, transparent and informative through the entire process, and objective while providing information.

Budgeting

While determining the budget for the purchase of property, there are several expenses besides the purchase price that must also be accounted for, such as:

  • Stamp duty

  • Registration fees

  • Legal fees

  • Brokerage fees

  • Society transfer charges (in buildings with societies)

  • Cost of renovation/improving the property

  • Cost of furnishing the property

  • Future house tax/property tax payments

  • Maintenance fees, whether at actual or in the form of monthly payments to a society

For newly constructed properties, it is also possible that the builder/developer may not be fully transparent at the time of booking with regards to the gross pricing of the property. The gross price should typically be a sum of the base price, external development charges (EDC), infrastructure development charges (IDC), preferential location charges (PLC), car parking charges, club membership if applicable, electricity and water connection charges, maintenance charges and any other applicable taxes.

While external development charges are levied by the developer on the buyer for developing infrastructure within the complex, infrastructure development charges are levied by the government on the developer and, in turn, passed by the developer on to the buyer. This charge includes development charges for water supply, sewerage, storm water drainage, roads, street lighting, community buildings, horticulture, public health, road maintenance, and street lighting maintenance. Electricity and water connection charges are levied by the developer on the buyer for availing of electricity and water connection on behalf of the buyer.

Identifying a Property

There are numerous factors a buyer might consider while purchasing property, each with its own benefits and disadvantages.

Independent House vs. Apartment in a Co-operative Housing Society: Setting aside advantages related to independence and privacy, some of the most important factors to consider while making this decision in India are maintenance costs and responsibilities, amenities that may be provided by housing societies such as swimming pools, health clubs, and gardens, and arrangements for parking, security, power backup.

Old vs. New construction: Sale price is generally determined on the basis of built-up area i.e. the measurement of the residential unit at floor measurement, including projections and balconies, and is measured from the external perimeter of the walls, whereas the carpet area i.e. the total area of a premises measured from the internal walls, is the area that is actually usable. In new constructions, the difference between the two might be substantial, and a buyer can end up paying a hefty sum for a smaller apartment, whereas in old constructions this difference is far lower.

Further, property and municipal taxes on new constructions are assessed at a higher rate and therefore the monthly outgoings would be higher. However, maintenance standards of new buildings are generally better than those of old buildings, and new buildings often provide amenities such as swimming pools, health club, garden, earthquake resistant designs, etc. which an old building might not possess.

Location: This is an oft-repeated mantra, which in India is taking a new meaning. With the construction of new infrastructure such as highways, bridges and metros –which has generally resulted in appreciation of values in neighbourhoods being served.

Assessment of Value

Another factor while choosing a property is whether the price is proportionate with existing market values. Information on previous transactions can be obtained from the market (brokers, residents of the neighbourhood/complex, registrar’s office, etc.), but the best option would be to consult a good realtor for advice on the last transacted sale price, comparable sale transactions etc.

Buying from a Developer

There are several factors to consider when buying property that is still under construction. Reliability of the developer is paramount, and the buyer should enquire the developer’s reputation and record before committing to buying any property still in development. It is important that the buyer look into aspects such as timely possession, quality of construction, compliance with the buyer’s agreement (especially penalty clauses), providing the amenities mentioned. If the buyer is convinced that the developer is reputable, then he should commence a search of necessary documentation, such as:

  • An approved plan of the building along with the number of floors, and that the floor on which the apartment intended to be purchased is approved or not.

  • Whether the developer owns the land on which the building is located, or whether he has undertaken an agreement with a landlord. If so, the title of the land ownership, development agreement with the landowner, and power of attorney executed by the landowner in favour of the developer must be checked.

  • That the land is not designated as agricultural land, else the construction will be illegal.

  • The building byelaws as applicable in that area and whether the builder is not in violation of front setback, side setbacks, height, etc.

  • Whether the specifications given in the “agreement to sell” or the sale brochure correspond with the plans of the construction.

  • Whether urban land ceiling NOC (Non Objection Certificate), if applicable, has been obtained, and whether NOC from water, electricity and lift authorities has been obtained.

Once the buyer’s agreement is executed, the buyer would typically pay about 10% of total sale price as a deposit. As the property being purchased is not yet complete, there are several options a buyer can choose from as far as the remaining payment is concerned.

Due Diligence

Once the property has been identified, and a price agreed with the seller, the buyer’s lawyer will conduct a ‘due diligence’ or a search of all the documents related to the property to ensure that there are no deficiencies with the property that will hinder the proposed sale.

Title: Probably the first and most important thing. A title search is taken at the office of the local sub-registrar. The buyer should ask for all title documents (and copies of the same) right from the first owner of the property or, in the case of property that is extremely old, title documents of thirty years prior to the search. This process can take from 10 to 15 days. The buyer should also ascertain the survey number, village and registration district of the property as these details will be required for registration.

Encumbrances: The office of the local sub-registrar would also have to be searched to see if there are any encumbrances on the property, such as a mortgage, lien, or claim from a third party.

Property Tax: The lawyer must also check tax receipts for the past three years to determine whether the seller has paid the requisite property tax to the housing society or, in the case of independent houses, to the municipal authority.

Litigation: It is also essential to ensure that the property is not the subject-matter of any litigation, as cases pending before the courts can take several years to be finally decided.

Probated Will: In case of property that the seller has inherited, the buyer must check the Will by way of which the property was acquired. Although Indian law does not require a Will to be probated (i.e. authenticated by a court), this is preferable as a probate ensures legitimacy of the Will and is valid against any claims thereafter made against the seller’s right to inherent the property. Although challenging a probated Will is not unheard of, it is extremely difficult for someone to do so successfully if the Will is not fraudulent.

Buyer may back out of the final sale for the following reasons:

  • Defect in title

  • Non-payment of property tax (if not remedied)

  • Material structural defects in the property

  • Zoning/ land use related issues:

    Constructing unsanctioned floors

    Unsanctioned construction on agricultural/coastal land

    Unsanctioned construction plan

    Previously undisclosed encumbrances on property such as mortgages, liens, or claims.

  • Absence of probated Will (if previously undisclosed): Note that the seller has the right to back out of the final sale if the buyer delays the process unnecessarily. Once the buyer is satisfied that the seller’s title is free from defects, he will issue a title certificate, which is a document stating that the seller has the necessary title to sell the buyer his property.

Agreement to Sell

After the buyer’s lawyer has issued the title certificate, the seller’s lawyers will draw up a document known as an ‘agreement to sell’. The agreement to sell will contain the terms and conditions of the sale, and while there is no standard format for the same, it usually contains the following vital information:

  • Description/location of the property.

  • The purchase price of the property.

  • The amount of deposit payable by the buyer – usually it would be in the range of 10% to 20% of the purchase price to be paid in advance.

  • Date of closing – the date on which the purchase price is to be fully paid to the seller and the sale deed executed and registered by him.

  • Absence of probated Will (if previously undisclosed): Note that the seller has the right to back out of the final sale if the buyer delays the process unnecessarily. Once the buyer is satisfied that the seller’s title is free from defects, he will issue a title certificate, which is a document stating that the seller has the necessary title to sell the buyer his property.

  • Date on which the buyer will be given possession of the property. The agreement to sell might also contain provisions to deal with breach by either party – e.g. forfeiture of deposit in case of buyer’s default, or return of deposit along with interest in case of seller’s default – an arbitration clause or a clause specifying the court which would have jurisdiction in case of a dispute, and provisions for inspection or investigation of title, such as the time in which this is to be completed.

It is imperative that a buyer should not sign any documents unless both he and his lawyer are satisfied with its contents.

Sale Deed

When the agreement to sell is duly registered and the purchase price (or a portion thereof, if so agreed upon), the seller’s lawyer will draw up a document known as a sale deed. This is the document by which the buyer will acquire ownership of and title to the property.

There are certain fees that are required to be paid with respect to the sale deed. Stamp duty, a levy imposed by the government on certain instruments, is payable on the property under the Stamp Act of the state in which the property is located.

Like the agreement to sell, the sale deed too is required to be attested by two witnesses and registered, and the PAN cards of the buyer and the seller will be required. Registration of the sale deed is carried out by lodging the original stamped agreement with the relevant registration office. Registering the sale deed is crucial as the title to the property does not pass to the buyer unless it is duly registered in accordance with the Registration Act.

Please bear in mind that stamp duty and registration fees are two entirely separate costs, both of which are to be borne by the buyer, unless otherwise agreed between the buyer and the seller.

Other documents to be checked before buying any property are:

1. Mother Deed:

Mother Deed, also known as the parent document, is an important legal document that traces the origin/antecedent ownership of the property from the start (if the property has had various owners). It is a document that helps in the further sale of the property, thereby establishing the new ownership. In case of absence of the original Mother Deed, certified copies should be obtained from the registering authorities. Mother Deed includes the change in ownership of the property, be it through sale, partition, gift or inheritance. It is very important that the Mother Deed records the references to previous ownership in a sequence and should be continuous and unbroken. In case of a missing sequence, one should refer to the records from the registering offices, revenue records or the recitals (preamble) in other documents. The sequence should be updated until the current owner.

2. Commencement Certificate (For under construction property):

A Commencement Certificate is a legal document issued by the local authorities after the inspection of the site. This document states that project meets the given criteria and helps in the commencement of a construction on a site by the builder. Failing to acquire a Commencement Certificate will result in the construction being considered illegal, levy of penalties and can even attract an eviction notice.

3. Conversion Certificate (Agricultural to Non-Agricultural land):

With a vast amount of land being agricultural in nature, a Conversion Certificate is mandatory to be obtained. A Conversion Certificate is issued to change the use of the land from agricultural to non-agricultural purpose from the competent revenue authority. Further, the competent revenue authority requests the Department of Town and Country Planning to issue an NOC for the conversion of land for residential purpose. There are a certain set of documents to be submitted by the owner to acquire a Conversion Certificate. The documents required to obtain a Conversion Certificate are:

3 copies of the R.T.C extracts, Village map, land sketch, certified copy of the land tribunal, zonal certificate, Title deed, no dues certificate by village accountant and Mutation Records (MR) copy.

4. Khata Certificate and Khata Extract:

Khata is derived from the word ‘account’. It is an account of a person owning a property. It typically consists of (a) Khata Certificate and (b) Khata Extract. A Khata Certificate is mandatorily required for the registration of a new property and the transfer of a property. Khata Extract is nothing but obtaining the property details from the assessment registrar.

5. Betterment charges receipt:

Betterment charges are also known as improvement fees/development charges that are to be paid. Currently the developers are entitled to pay a fixed amount as betterment charges to the municipal body. A receipt of the same should be obtained at the time of property buying.

6. Power of Attorney (POA):

A POA is a legal procedure used to give authority to another person by the property owner on his/her behalf. One can either give a Special Power of Attorney (SPA) or a General Power of Attorney (GPA) to transfer one’s rights over one’s property.

7. Completion Certificate (for a constructed property):

A Completion Certificate is issued by the municipal authorities denoting that the building is in compliance with their rules in terms of height, distance from the road, and is constructed as per the approved plans. This document is important at the time of purchasing a property and seeking a home loan.

8. Occupancy Certificate (for a constructed property):

When the builder applies for this Certificate, an inspection is carried out by the authorities to ensure that the construction meets all the specified norms. This certificate is obtained after the completion of the construction. It is important at the time of buying a property, seeking a home loan, before the builder allows people to take possession of the property and, for the transfer of Khata. Basically, it certifies that the project is ready for occupancy.

As contributed by:

Mr. Varun Singh

Advocate & Legal Consultant

Supreme Court Of India, Delhi

DISCLAIMER: PurpleHomes.Com assumes no responsibility or legal liability for transactions entered into by placing reliance on these FAQs.

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