What is the list of documents that you should verify before booking a property?
A. Confirm the approved plans from the appropriate authority are in place.
B. Check that all other permissions from various authorities are in place. E.g. Utility Companies, Environment clearance, Airport Authority, etc.
C. Confirm that the Land title is clear and there is no disputes/litigation (Title Certificate). D. Confirm Builder has the Intimation of Disapproval (IOD) and commencement Certificate (CC) to start construction.
E. Have the agreement evaluated by an Advocate. Check possession date promised and provide for penalty if Builder does not deliver as agreed.
F. Check and negotiate the payment schedule.
G. Do not book in Pre-launch without executing and registering the agreement. In Maharashtra, it is mandatory for Builder to do both at inception stage itself.
What documents are necessary before making a sale deed?
Same set of documents as above. The agreement must record the title flow, the various permissions taken and the terms agreed to by the parties. In Maharashtra, the Maharashtra Ownership Flats Act, 1963 prescribes disclosures to be made, documents to be attached and even a model agreement format which is mandatory in part.
List of documents to verify at the time of registering your property
1. Approved plans
2. Title Certificate from Advocate of current date
3. Copy of IOD/Commencement Certificate
4. Stamp duty paid receipt
5. Demand Draft for payment of Registration fees.
6. Property Card showing CTS No. of plot
7. PAN cards of Sellers and Buyers 8. Khata Extract
Due diligence before buying a resale property
1. Check for a duly stamped registry
2. Ensure no dues are accorded to the builder
3. Check for seller’s name in municipal records
4. Confirm seller’s membership in the society (if formed)
5. Ensure there are no pending bills, charges or taxes
6. Make sure that the property is mortgage free
7. Sanctioned Building Plan (to ensure no unauthorized construction)
8. Previous title documents (that chain of title is complete)
How to verify project approvals documents?
Same documents as above would need to be verified for checking project approvals. Confirm approved plans, other approvals such as environmental clearances are important and NOC from utility companies. Title Search must be carried out at the Sub Registrar’s office to verify title and ascertain encumbrances, if any.
How to verify the authenticity of the various documents submitted by the seller?
1. Approved plans can be verified from the corporation or other plan sanctioning authority’s office.
2. Ownership documents of land or development rights held by the builder can be confirmed from the Sub Registrar’s office where they are registered.
3. Society share certificate can be verified from the Society itself.
Which documents must be compulsorily registered?
As a general rule the following documents pertaining to immovable property must be registered vide Section 17(1) of the Registration Act, 1908:
(a) Instruments of gift of immovable property;
(b) other non-testamentary instruments which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees, and upwards, to or in immovable property;
(c) non-testamentary instruments which acknowledge the receipt or payment of any consideration on account of the creation, declaration, assignment, limitation or extinction of any such right, title or interest; and
(d) leases of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent;
(e) non-testamentary instruments transferring or assigning any decree or order of a court or any award when such decree or order or award purports or operates to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immovable property.In Maharashtra State, w.e.f. 1-4-2013, the following additional documents are also required to be compulsorily registered:
(f) agreement relating to the Deposit of Title Deeds, where such deposit has been made by way of security for the repayment of a loan or an existing or future debts;
(g) Sale certificate issued by any competent officer or authority under any recovery Act;
(h) Irrevocable Power of Attorney relating to transfer of immovable property in any way, executed on or after the commencement of the Registration (Maharashtra Amendment) Act, 2010.”
What all documents should you have at the time of possession?
1. All original chain of agreements form part of the title documents and must be obtained by the buyer.
2. Do remember to obtain the original registration receipts and the original stamp duty receipts.
3. A letter of possession duly witnessed by two witnesses confirming the physical handover of the premises.
4. In case of a Society, the original share certificate together with all transfer forms duly executed.
5. Proof of payment of all dues such as maintenance, electricity, phone, water, property taxes upto the date of handing over possession.
6. A limited power of attorney from the Seller(s) authorizing the buyer(s) to sign all documents and applications etc. pertaining to the said premises.
7. An NOC from the Society or other body confirming that they have no objection to the transfer.
What is a sale deed?
A sale deed, also called a “conveyance”, is a document which transfers immovable property be it land or a house, flat, office or other structure to another person. In almost all cases, the sale deed must be registered compulsorily except in the case of resale of units in existing cooperative societies where the state law grants a specific exemption from registration. Regardless, all sale deeds are liable for stamp duty and the rates vary from state to state. Also the duty depends upon various factors, such as age of building, location and type of unit and so on.
What is a title deed?
A title deed is a document that proves the right of a person to an immovable property. A person can acquire an immovable property by various means and a properly stamped and executed document evidencing the transaction is a title document. For example a sale deed, a release deed, a relinquishment deed, a gift deed, a family settlement deed, a partition deed, a will all are evidence of how a person has acquired an immovable property and may be called title deeds.
What is a conveyance deed? Why is it required?
The word conveyance means the transfer of ownership or interest in real property from one person to another by a document, such as a deed, lease, or mortgage. In India, transfer of property or rights in immovable property is governed by the Transfer of Property Act, 1882. For the transfer of any immovable property or rights in immovable property, it is necessary to execute a conveyance deed.
What is deemed conveyance? Why is it required?
Many Builders have failed to transfer the buildings to the society or condominium formed by them despite it being mandatory for them to do so. In Maharashtra, the Maharashtra Ownership Flats Act, 1963 permits a Society, Company or Association of members to apply unilaterally for a conveyance if the Builder fails to do so to the competent authority. The Sub Registrar will thereafter register the Conveyance after giving an opportunity to the builder to show cause as to why the conveyance should not be registered. The Conveyance grants title to the Society. Many a time, Societies have found the lack of a conveyance to be a serious impediment when they set out to redevelop or reconstruct the building(s).
What is a building completion certificate?
A building completion certificate is the final document granted by the plan sanctioning authority and usually follows the occupancy certificate. This document certifies that all acts necessary in connection with the construction of a building are complete.
What is an occupancy certificate?
An occupancy certificate is granted by the plan sanctioning authority once the building is complete and ready for Inhabitation. In some places, an official water connection is granted only after the OC has been obtained. This document is given after verification that the construction has been carried out in accordance with the approved plans. The builder is not entitled to give possession and the unit buyer is not allowed to occupy the unit till the OC has been obtained. Further, the property comes into existence on and from the date of granting of OC. Property taxes are also levied as a unit from the OC date.
What is a Khata?
A Khata is a record of assessment of a property, giving details of the property such as location, area, usage etc. for the purpose of payment of property tax. It is issued by the Municipal Corporation or other authority entitled to levy property tax such as a Development authority or a Panchayat. The Khata shows who is the registered owner of the property in the records and if you have acquired a property by sale, gift, will, etc. , you should have your name substituted for that of the seller in the Khata. This is another document you must check whilst buying a property to verify the title of the seller.
How to register your property?
The original property document to be registered along with a copy is to be presented with the concerned Sub- Registrar by the Seller. Both Seller and the Purchaser are present before the concerned Sub- Registrar who admits the execution of the document. The sub- registrar after making the due inquiry registers the documents and returns the original document to the concerned party.
Can you sell the flat without registration?
No. You cannot sell a property without proper registered document(s). A registered document is the authenticity and guarantee of the ownership over the property. Neither should one sell a property without proper registered documents and neither should one purchase a property wherein the seller does not have registered document of his/her ownership in the Property.
What is Power of Attorney?
Power of Attorney is the right/authorization given by a property- owner to someone through whom the owner transfers the power and rights to deal with the Property to his/her chosen power of attorney. A power of attorney can be either a co-owner of the property, a blood- relative of the owner or any other person not related to that property or the owner.
There are two types of power of attorney that can be granted namely ‘General Power of Attorney’ wherein a property owner gives ‘general’ rights to his/her chosen attorney. These include but are not limited to sell, lease, sub-lease etc. the Property as the Power of Attorney deems fit. The other type is ‘Special Power of Attorney’ wherein only a ‘special’ or ‘specific’ right is given by the owner to his/her chosen Power of Attorney.
Can a Power of Attorney be issued to someone else to register the document?
Yes, by executing a ‘Special Power of Attorney’ for this purpose, the property owner can transfer his/her right to register a property document to someone else.
What is the difference between leasehold and freehold property?
The basic difference between a leasehold property and the freehold property is the ‘ownership’ of the Property. In a leasehold property, technically the ownership remains with the concerned Authority or the government (as the case maybe). But this does not bar the individual owner (known as Lessee in this case) from selling or dealing with the leasehold property as he/she may deem fit. In a leasehold property, the Lessee has to basically execute a tripartite sub- lease deed executed between the Lessee, the Purchaser and the Lessor (which is the concerned Authority or the government). Whereas in a freehold property, the owner of the Property is the final owner of the Property and can sell/lease/mortgage the Property as he/she may deem fit.
How to convert leasehold property into freehold property?
Conversion from leasehold to freehold can be done only if the local laws allow it. For instance, property owned under Delhi Development Authority can be converted to freehold by executing a Conveyance Deed. However, conversion of leasehold to freehold is not an option for properties falling in New Okhla Industrial Development Authority (NOIDA).
The process of converting leasehold to freehold, the owner (Lessee) applies to the concerned Authority or Government requesting the conversion of the Property. Thereafter, a Conveyance Deed is executed between the concerned Authority or Government and the Owner of the Property.
What are the taxes that need to be paid at the time of property purchase?
The buyer needs to pay the following taxes at the time of registering the property:
• TDS or tax deduction at source on amount exceeding Rs 50 lakhs for the purchase of immovable property excluding agricultural land. The TDS must be submitted in the name of the seller.
• Stamp duty on registration
• Service Tax is applicable if the property is being purchased from the builder who conceived and constructed the project before offering possession to the buyer. If a ready-to-use property is purchased from the seller then service tax is not applicable.
• Value Added Tax (if applicable in the state).
What are the prevailing rates of different property taxes to be paid?
TDS- 1% on the amount exceeding Rs 5o lakhsStamp duty depends on the state and municipal lawsService tax- 12.36% if the property is being developed by a builder/developer as a service for buyers.
What is TDS or tax deduction at source on property?
A new section 194IA has been inserted in the Income-tax Act, 1961 by the Finance Act, 2013. It provides for tax deduction at source on transfer of certain immovable property other than agricultural land of Rs. 50 lakh or more.
As per this new provision, any person, being a transferee responsible for paying to a resident transferor by way of consideration for transfer of immovable property other than agricultural land, shall at the time of credit of such sum to the account of the transferor or at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, is required to deduct an amount equal to 1 percent of such sum as income-tax thereon specially when the value of the immovable property is Rs. 50 lakh or more.
How is TDS on property calculated?
In terms of calculating the cost on which TDS needs to be calculated, everything paid to the seller in consideration for property is considered i.e.
• Basic cost
• IDC, EDC, PLC
• Fire-fighting equipment
• Electrification, wiring expenses etc.Anything paid to the third parties or other authorities are excluded
• Stamp duty
• Registration fees
• Any payments to government authorities.
• Taxes charged by the builder
In case a ready property is being purchased from an end user, then everything paid to the seller in consideration for the property as per the agreement-to-sale is considered.
What are capital gains on property sale?
The income tax rules define gain in two broad categories; namely short term capital gain (STCG) and long term capital gain (LTCG). Any gains arising by selling a property after holding it for 3 or lesser number of years, is short term capital gain. Any gains arising by selling the property after holding it for more than 3 years comes under long term capital gain.
For short term capital gain, the capital gain from asset is added to the investor’s income and taxed as per the income tax slab they fall under.For long term capital gain, tax liability is determined based on indexed cost of acquisition and improvement. Indexation is a concept, which factors inflation in its calculation by using a factor called cost inflation index (CII).
How to calculate short term and long term capital gain? Is it calculated from the date of registration or from the date of possession?
Possession certificate from the builder is what matters the most. Registration does not. The nature of the tax can be assessed based on the following two scenarios
During the under-construction phase
• When the buyers books the property rights by making an advance payment and makes subsequent payments to the developer as and when demanded and also with the progress in the construction then he gets the right to acquire a residential unit, and not a residential unit.
• The right is acquired by executing documents with the builder like allotment letter, or execution of builder-buyer agreement (whichever happens first).
• If the buyer has not obtained possession of the property, the right of the buyer would be in the nature of capital assets and accordingly, gain arising on such transfer would be in the nature of long term or short terms gain depending upon the period of holding. If more than 3 years, it is LTCG otherwise it is STCG.
• Section 54-F is applicable to exempt your capital gains from taxes i.e. entire sale proceeds net of expenses incurred to complete transfer would require to be reinvested to exempt capital gains from taxes.After the possession of the property• The unit becomes a residential house after the buyer obtains the possession from the developer. The nature of capital asset has changed – from rights to acquire to a residential house.
• Therefore, period prior to taking of possession is not to be considered.
• When you take possession of the flat which you have agreed to purchase, the right to purchase the flat gets converted into the flat itself. Therefore, if you sell the flat after taking possession, the period of three years begins/commences from the date of taking possession of the flat.
• Capital gains tax Long term or short term liability can accordingly be computed depending on period of holding of the right to own a flat or asset.
What is Stamp Duty and who is liable to pay the Stamp Duty?