These days, many people look out for safe and profitable investment opportunities to grow their earnings to get financially secured in future. Purchasing a property is considered one of the most attractive investment options because of its quick appreciation rates and the lucrative returns it offers on the money invested.
However, the idea of buying a property can be a tricky one considering the amount of paperwork and the differences existing in the land laws framed by the respective state governments. Very often, buyers are unaware about the kind of documents and the processes required to be followed for purchasing a property.
Hence, this article will delve into the list of documents required to be examined for purchasing a property by a buyer and the key points a buyer should bear in mind prior to the purchase of a property.
Key Documents For Consideration
Documents required for purchasing a property typically rests upon the nature and its kind. For instance, a property may be of a residential or commercial nature or be developed on a freehold or leasehold land or had been an ancestral property. Prior to purchasing a property, assessing the nature and type of property is always vital for a buyer considering the hefty amounts involved in these property transactions.
A buyer shall initially assess the seller’s title to the property made available for sale and, upon becoming satisfied shall be aware about the kind of documents required to be executed with the seller. Following is the prescriptive requisition list of property related documents which shall be relevant from a buyer’s point of view:
(A) Initial List of Documents Required for Ascertaining the Seller’s Title to the Property
1. Perpetual Lease Deed
Generally, properties which had been existing from the time of independence, were allotted to its owners by way of a perpetual lease deed for an infinite term. The President of India through state development authorities such as Delhi Development Authority (DDA) executed a perpetual lease deed to issue and allot certain portion of land parcel in favour of the property owners. The provisions of the said lease deed granted rights to a property owner to further deal with the property in any manner whatsoever including the sale of the property in favour of a third party. Therefore, while dealing with property of such nature, it is vital for a buyer to obtain a copy of such perpetual lease deed from the seller for tracing the title of the property and get hold of the information related to its erstwhile owners as well as the actual description of the property.
2. Sanction Plan
A sanction plan is a document issued by the concerned municipal corporation authority, which provides an overall description of the entire property including the adjoining boundaries, measurement, directions, Floor Area Ratio (FAR) etc. It is one of the most critical documents in relation to a property and quite often the buyers miss out to obtain a copy of the same from the sellers. Given the number of illegal constructions observed in the real estate sector, it is important for a buyer to procure a copy of the sanction plan approved in favour of the seller prior to purchasing a property. Considering that the buyers usually opt to reconstruct the entire property after getting possession in their favour, the permissibility towards further development of the property is dependent on the sanction plan. However, in most cases, it has been observed that the buyers end up paying hefty penalties to the municipal authorities on account of reconstruction or further development because of not having adequate description on the sanction plan approved for the property concerned and not procuring the same from the seller at the time of purchase.
3. Electricity Bills, Telephone Bills, Water Bills
The utility bills pertaining to electricity, telephone, water, gas pipeline etc. provides details of the erstwhile owner(s) of the property as well as the exact location where the property is situated. Moreover, utility bills also provide a clear picture pertaining to the nature of the property as, charges for such utility services may differ for a residential or commercial property. Whether a property has been in a running condition or has not been occupied for long can be ascertained through the date at which the utility bills has been issued by the service provider. Presently, as most of the utility services are extended pursuant to verification of Aadhar details, these bills generally will give an idea to a buyer about the owner of the property.
4. Occupancy Certificate
After the construction of a property is completed, the concerned state municipal corporation authority inspects the property and upon its satisfaction, issues an occupancy certificate in favour of the property owner/developer declaring that the property constructed is ready for occupancy by a person. Occupancy certificate is a vital document from a buyer’s perspective for ascertaining the overall health of the property and be fit to use for its enjoyment.
5. Mutation Record
A mutation record is a document maintained by the concerned municipal authority which sets out the details of the current property owners. Mutation record also provides information pertaining to the transfer of property amongst the erstwhile owners. Based upon the mutation record, the concerned municipal corporation levies property tax on the current property owners having their property within the respective municipal zone.
6. Property Tax Receipts
Property tax receipts provides record of all the taxes that have been paid by the owners of the property to the concerned municipal corporation of the district. It is also a piece of evidence for a buyer, regarding the representation given by a seller at the time of property deal that there are no dues and property taxes pending from its side. It also establishes a valid and true legal status of the property which has been notified in the records of the statutory authority.
7. Encumbrance Certificate
This document is a kind of declaration provided by the seller to a buyer stating that the property is free from encumbrances. Encumbrances may include an existing mortgage, charge, pending litigation and any of such factors which can restrict the enjoyment of the property for a buyer.
A jamabandi is a document which is maintained by a state land revenue authority of the concerned jurisdiction which consists of the entire title chain of ownership to the property. Through a Jamabandi, a buyer will get information about the chain of transactions entered by the present owner with erstwhile owners and helps in verifying the title of a property held by the present owner. It is the major proof of ownership of a property.
(B) List of Documents Required To be Executed for Purchasing A Property
1. Special Power of Attorney
At times there will be instances that an owner of the property may not be physically available for undertaking the transaction pertaining to the sale of a property by virtue of staying in a foreign country. In such a case, owner may appoint an individual who shall act as an attorney and will on behalf of the owner maintain the property. Moreover, such attorney shall also be authorized to undertake the entire transaction of sale of property in favour of the buyer on behalf of the owner. From a buyer’s point of view, considering that the entire dealings related to the property will be handled by the attorney holder, a buyer shall thoroughly verify the contents and the authenticity of the power of attorney document produced by the attorney holder at the time of sale of the property. Also, the buyer shall try to get in touch with the seller to verify the legitimacy of the attorney holder.
2. Agreement To Sell
An agreement to sell contains the entire description of the property and the terms and conditions agreed between a buyer and a seller. Under this agreement, the property is transferred in favour of the buyer at a future date by the seller. At the time of execution of the agreement to sell, the buyer initially pays a token amount to the seller which is typically 10% of the total price of the property, to express its interest in relation to the purchase of the said property. Upon receipt of token amount till the date of execution of the sale deed, the seller is required to reserve the property exclusively in favour of the buyer and is not supposed to deal or sell the property to any third party. In case, the buyer decides to withdraw its interest from purchasing of the property, the seller may forfeit the token amount paid by the buyer depending upon the terms and conditions laid out in the agreement to sell. It shall be pertinent to note that the possession of the property is not handed over to the buyer at the time of execution of agreement to sell until a sale deed is duly executed between the parties and the same registered with sub-registrar office of the concerned district.
3. Sale Deed
Sale deed is the most important document for a buyer. It is the evidence to stipulate that the property has been transferred by the seller in favour of the buyer upon the receipt of the final payment towards the total price of the property. Generally, at the time of sale deed, the buyer pays the remaining balance amount towards the total price of the property to the seller in lieu of the token amount paid to the seller under the agreement to sell. By virtue of a sale deed, the seller hand overs the possession of the property in favour of the buyer free from all encumbrances, liens, charges, mortgage, sale, gift, attachments, litigations etc. A sale deed is required to be registered before the office of the sub-registrar of the concerned district to record the sale transaction executed between a buyer and the seller. The buyer and the seller are required to be physically present before the sub-registrar office of the concerned district in order for the sub-registrar to verify the genuineness of the parties to the transaction in the presence of independent attesting witnesses from either side and may thereafter record the execution of the sale deed in the state registry.
Purchasing of a property being one of the alluring investment options comes with its own set of challenges. A property likely to be purchased by a buyer may end up being termed as a disputed property by virtue of any pending litigations, ownership claims brought by a third party against the seller challenging the title to the property, attachment order issued by government or the property in question has been obtained by the seller by way of benami transaction.
Therefore, it becomes paramount for the buyers to have a clear overview in relation to the seller’s title to the property to avoid any dispute in respect of its ownership at a later stage and continue to have peaceful enjoyment of the property. Moreover, as the buyer invests heavy amounts for purchasing of a property, it becomes prudent for a buyer to act in a cautious and pragmatic manner. Given that that the courts in India are already pre-occupied with plethora of pending cases, therefore it becomes crucial for the buyer to carefully examine the property documents to its satisfaction and with utmost diligence.
Also, a buyer shall obtain as much of information from the seller in respect of its title to the property. In this regard, a list pertaining to property documents plays a pivotal role to help a buyer attain broader understanding about the property and things to be kept in mind prior to purchase of a property.
Frequently Asked Questions
1) Considering that the property may be located in some other state, how can a buyer get an idea about the list of documents it shall procure from the seller for its examination?
Generally, a buyer can get an idea about the list of documents by visiting the official websites of the concerned state development authority or land revenue authorities as the case may be. However, these websites may either provide a very limited information or may not have been updated from time to time. It is generally advisable for buyers to seek appropriate legal assistance from a local lawyer who will be able to render proper guidance and shall provide consolidated list pertaining to the property documents required for examining the seller’s title to the property.
2) What is the overall time being taken to purchase a property in India?
There is no standard time frame provided under the extant legal framework for purchasing a property in India. As per the market practice, a timeline of 60 (sixty) days is typically granted to a buyer for purchasing a property from the date of execution of the agreement to sell. However, a buyer may refer to a list of documents required for the purchase of the property. In case a permission is required to be obtained by a buyer from government authority in respect of a property sale transaction, the timeline for the said purchase might get extended.
3) Whether a non-resident of India can purchase a property in India?
A non-resident of India can purchase a property in India however, the same shall be subject to the guidelines prescribed by the Reserve Bank of India and the regulations framed under Foreign Exchange Management Act, 1999 (“FEMA”).
4) Whether documents related to purchase of property can be executed through electronic means by a buyer and a seller?
The documents related to purchase of immovable property cannot be executed through electronic means including digital signature. The Information Technology Act, 2000, does not permit parties to use digital and electronic signatures for entering into any transactions related to immovable property.