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Do’s and Don’ts of buying Real Estate

Buying immovable property in India is fraught with difficulties due to a combination of factors. A meticulous planning at the investment stage itself could indeed avoid hassles later. Some of the pre-requisites indicated below would immensely assist NRIs.

Before buying immovable property:

• Scrutinise all original payment documents. The title to the property may be single or joint ownership basis. In the event of any difficulty, a certified copy can always be obtained from local sub-registrar’s office on payment of a nominal fee.

• Refer the documents to a lawyer who may certify that clear title can be passed on to the buyer.

• Obtain ‘No-encumbrance certificate" for the past 30 years to ensure that no mortgage has been outstanding on the property to be purchased. This will also enable the buyer to ensure that the title belongs to the rightful owner who wants to sell it.

• Obtain required clearance under the Urban Land ( Ceiling and regulation) act.

• In the event of sale by a third party viz., real estate promoter, check whether he is the absolute owner or holds a registered power of attorney to sell the property. It is better to buy from an established developer with a unblemished record.

• Seek the assistance of a registered valuer to ensure price quoted is correct market value.

Agreement and Registration:

• An agreement on the price to be agreed and payment terms. Payment should invariably include a clause on payment of last installment on possession and registration

• Sale deed or Agreement to sell must be executed by the seller and buyer. This should include full details and origin to the title to the property, proper identification to the property by neighbouring survey numbers, payment terms and payments made so far and cheque/ draft references. Also make sure that the buyer-builder agreements are equitable and donot contain clauses that are violative of your rights and interests.

• Buyer should ensure that their right is not negated in the sale deed through undertaking additional construction in violation of the Apartment Ownership Act if the municipal bye-laws permit it at a future date.

• The stamp duty varies from state to state in India. Ensure that the prevailing stamp duty is remitted. It is levied on the land value of the apartment and in some it is on the whole.

• The seller on completion of the project should execute the transfer of title to the buyer by getting it registered with the local sub-registrar of properties under whose jurisdiction the propertyu is located.

• While buyer’s presence is not necessary who can authorise his representative to execute the document, the seller ( this need not be the real estate promoter) must be present and transfer the title by signing the transfer deeds and all appropriate documents.

• The sale deed prepared earlier is only an initial contract. Before registration, the final deed is prepared on stamp papers of appropriate value which will be the prevailing rate of stamp duty in the respective states. This set of documents should be executed by the seller.

• Note that under Section 230 A of the income Tax act, 1961 all sale deeds showing the prescribed value and above should be cleared by the Income Tax officer. Only then, the Registrar will register the property.

• Irrespective of the value shown in the document, the Sub-Registrar will determine the market value of the property and the stamp duly.

• In case of purchase of apartments, proportionate share of the land on which the apartments are built are registered.

• The price indicated by the promoter should be firm. If the promoter desires for escalation, it should be done in accordance with the procedure followed by the Government undertakings and should form part of the Agreement.

• The Agreement should accompany plans, drawings and specifications of each item of work.

• The Agreement should specify the completion date and the terms of compensation in the event of delay in delivering possession of the apartment.

Remedy:

• In spite of all efforts if a buyer gets duped, a complaint may be lodged under the Consumer Protection act.1986, which is a Central Act. Representation can also be made to the Monopolies and Restrictive Trade Practices Commission ( MRTPC ) for issuing instructions for indulging in unfair trade practices
• A number of states and union territories have established consumer protection councils. The redress machinery, which is quasi-judicial, has also been set-up in a number of states.