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This explainer deals with the purchase and sale of immovable property in India and various modes of acquisition of property. The same is governed by the Transfer of Property Act, 1882 (“TP Act”); the Foreign Exchange Management Act,1999 (“FEMA”) and FDI Master Circular issued by the Reserve Bank of India on the subject matter. The explainer also aims to discuss foreclosed properties (property, which was kept as collateral for a home loan or mortgage but acquired by the money lender due to non-payment of three or more Equated Monthly Installments (EMIs)), the purchase of which is governed by the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (“SARFAESI Act”).
Optional Grouping: Transfer of Immovable Property
What are the different types of immovable property?
Under Indian laws, immovable property includes land, buildings, hereditary allowances, rights to ways, lights, ferries, fisheries or any other benefit to arise out of land, and things attached to the earth, or permanently fastened to anything which is attached to the earth, but not standing timber, growing crops nor grass.(( Section 2 (6) of the Registration Act, 1908)) Due to the fact that land is a state subject under Schedule VII of the Indian constitution, the laws governing immovable property vary from state to state.
Why is registration of an immovable property so important?
The purpose of registering transfer of immovable property is to record the signing of the document. The ownership and transfer become legal only after registration, i.e. the ownership of the property is rightfully transferred only upon registration before the sub-registrar. Another significant benefit of paying registration fees and stamp duty is that the same are eligible for tax exemption under Section 80C of the Income Tax Act, 1961.
What is the process for registering the transfer of an immovable property?
Property or land registration in India involves(( Section 17 of the Registration Act, 1908)):
- paying stamp duty and the registration fee for sale deed, and
- having the documents legally recorded with the sub-registrar of the area where the property is located. At the time of registration, the authorised signatories of the seller and the purchaser have to be present along with two witnesses.
Stamp duty varies depending on the area where the property is located. For eg: In Mumbai, the stamp duty is 5% of the total property value, which includes 1% metro cess(( https://housing.com/news/maharashtra-stamp-act-an-overview-on-stamp-duty-on-immovable-property/)). Usually, the seller is responsible for registration of the transfer of immovable property, and the purchaser is responsible for the payment of stamp duty.
Today, most states have their own web portals for property registration and the payment of stamp and registration fee. It does however require the buyer to physically visit the office of the sub-registrar with the documents, once the online process is completed. Also, the user-friendliness and the number of services one can seek from these portals varies from state to state. For eg: the Delhi government has multiple portals that an individual would have to go through to complete the registration process, but there are plans to introduce a single window portal soon(( https://housing.com/news/property-registration-online-in-delhi/)).
Is it more beneficial to register an immovable property on a woman’s name?
Yes, it is more beneficial to register an immovable property on a woman’s name, as many states and banks have introduced financial benefits for women buying property. As a result, buying property in a woman’s name can bring many advantages such as:
- Lower stamp duty rates: States like Delhi(( More information available at: http://fs.delhigovt.nic.in/wps/wcm/connect/doit_revenue/Revenue/Home/Services/Property+Registration)), Haryana(( Stamp Duty can be calculated at https://jamabandi.nic.in/StampDuty by entering the gender of the owner and the stamp duty for women is 5% of the total value of the property and for men, it is 7%)), Rajasthan(( Detailed information available at https://igrs.rajasthan.gov.in/writereaddata/Portal/Images/fees_new.pdf)) and Uttarakhand(( More information available at: https://registration.uk.gov.in/files/Stamps_and_Registration_-_Stamp_Fees__Regn_Fess.pdf)) have lower stamp duty rates for women buyers or for joint buyers, as compared to sole male buyers.
- Reduced home loan rates: Many banks and financial institutions offer loans at discounted interest rates for women buyers. The specifics can be found on the banks’ official websites.
- Tax Exemptions: Women homeowners are eligible for tax deductions on interest paid towards home loans. Women are also eligible for other tax benefits.(( More information on the benefits available to women homebuyers available at: https://blog.ipleaders.in/benefits-women-home-buyers-india/))
How can I transfer property to an unborn person?
In order to transfer property to an unborn person, you must first transfer the property to a living person, which is usually done through the creation of a trust, until the unborn person comes into existence. This creates a vested interest in favour of the unborn person.(( Section 13 of the Transfer of Property Act, 1882.)) For instance, if A is pregnant with a child, a trust can be created in the interest of the child and this trust will hold the property until the birth of the child. The trustee will essentially act as the unborn child’s proxy until the child is born. To put it simply, the property sits with someone untouched until the birth of the person to whom it was transferred. The trust simply holds the property till that time.
How is gifting an immovable property different from sale or purchase of a property?
A gift is a transfer of movable or immovable property without consideration, i.e., without money. When a transfer of immovable property happens without any payment made while receiving such property, it is considered to be a gift. In such cases, the parties who give and receive property are known as Donor and Donee. For a gift of immovable property to be valid under the law, the transfer must be:
- Done through a registered legal instrument signed by or on behalf of the donor
- Attested by at least two witnesses(( Section 123 of the TP Act.)).
Once it is signed and registered as per the due process of law, a gift deed cannot be revoked or taken back, except if the Donor and Donee agree beforehand that such revocation shall happen in certain conditions.
Who do you complain to if there has been an issue related to buying or selling property?
You can approach the court to raise disputes over land and property for various reasons including claim on ownership, contestation over land acquisition, disagreement / disputes over real estate transactions, conflict over property inheritance, and misuse of rented property among others. There are different laws and procedures which explain how an individual can seek redressal on these issues, depending on the particular circumstances under which the dispute arises. Such issues are better dealt with through lawyers specializing in land disputes. However, it is best to conduct your due diligence beforehand to make sure that your property is not stuck in a court dispute. Please talk to a lawyer or ask us any questions through the Ask Nyaaya Helpline.