Buying a Property

First and foremost, any individual resident in India, non-resident Indians living in another country, Indian companies, or trusts registered in India are entitled to purchase property in India.

Secondly, non-resident Indians and persons of Indian descent are also entitled to purchase or receive by gift any real estate situated in India without the Reserve Bank of India’s permission, except agricultural land, plantation property, and farms. In addition, non-resident Indians and persons of Indian descent are also permitted to inherit any real estate in India. There is no restriction on the amount of real estate that non-resident Indians and of Indian descent persons can own. In the real estate purchase case, payment can only be made in Indian rupees. Therefore, payment cannot be made in foreign currency.

Here are some steps to follow to buy a property in India:

A proper budget should be planned to know how much money you will have left each month to meet your expenses. You need to ensure that the property you buy will meet your current needs and stay within your budget. Understanding your family’s current major needs will help you make the right decision as a home buyer.

It is essential to choose a location and community that is right for you. It is best to try a location adjacent to your preferred location so that the price is not so high. Location will also have a significant impact on your home’s resale value. Choose wisely and your home could be your best investment.

If you are considering investing in a rental property, homes located in high-rent or highly populated areas are ideal. Knowing the rental rate in the area helps you choose the right property and location.

Resale value is important to consider before thinking about investing or buying a property. Property buyers never consider the resale value when they buy. They make the mistake of focusing only on a choice location or the budget of the property. If you choose the wrong property or the wrong location, your future selling price may still be lower than other homes around it.

Home loan eligibility depends on the repayment capacity, income, existing loans or debts, and age of the loan applicant. The loan company or banks provide online services such as a home loan eligibility calculator to calculate the loan eligibility of the borrower. The maximum loan that can be sanctioned varies by bank and the eligibility criteria may vary depending on bank regulations. As home loan rates increase, a borrower’s loan eligibility becomes more rigid.

This is a major expense or tax, just like the government’s sales tax and income tax. When planning your budget for buying a property and deciding to buy a property, you should know the rate and charges applicable in your city.

Even if this is not your first home buying experience, you will want to get a professional team’s help. Fees or service charges by real estate agents, lenders or mortgage brokers, home inspectors, land surveyors, lawyers, or notaries should be considered.

Property insurance protects your financial future if some damage occurs to your property. The cost is relatively low and provides coverage in case of problems with the title, certain damages, or any legal issues. There are many different home insurance policies with different levels of protection. When deciding to protect your key assets, it’s important to have a resource you can trust to guide you along the way. Choosing the right home insurance protects your property and makes the buying process easier.

Firstly, to legally purchase a property in India as an individual without the permission of the Reserve Bank of India (RBI), a foreigner must be considered as a “person resident in India” under Section 2 (v) of the Foreign Exchange Management Act. According to the RBI website:

“A foreign national who is a person resident in India “within the meaning of Section 2 (v) of the Exchange Management Act. He can purchase real estate in India, but the individual concerned will have to obtain approvals and fulfill conditions, if any, prescribed by other authorities, such as the concerned state government. The onus is on the individual to prove his residency status in accordance with the existing provisions of the Foreign Exchange Management Act if required by any authority.
A foreigner would also have to meet the requirements set by the RBI for foreign nationals and those of non-Indian origin.
Secondly, if you intend to buy a property, the visa with which you enter India is important as the type of visa must indicate the intention to stay in India for an uncertain period to determine residency status.A foreigner who meets all the requirements and acquires residency status under the Foreign Exchange Management Act is then able to purchase real estate in India, although there are restrictions on agricultural land, farms, and plantations purchase. You must therefore ensure that you have verified your right to legally acquire such land.

Finally, a foreigner who has purchased a property in India without meeting all the Indian government’s requirements (whether the purchase was made in good faith or not) could be subject to an investigation into the purchase and property’s legal ownership, which could, in extreme circumstances, lead to the property being confiscated and returned to the Indian government and a monetary penalty may be imposed.

An agreement is a legal contract between the seller and the buyer for the property’s sale, which governs the mutual promises made by each party. It is an official document that certifies the property’s sale and purchase. A sale agreement is a legal document and a written promise to transfer that property for a fee. It records the terms of such transfer and payment and mentions the penalty in case of non-transfer or non-payment of the house.

A property must be registered for sale, transfer, gift, or lease by the 1908 Registration Act. If a property is not registered at the transaction’s time, the transaction cannot be proven in court.

You must attach the following documents to the completed online form:

➤Parties Identity Proof (Aadhaar card, PAN card, etc.);
➤Parties passport photos;
➤Bill of Sale;
➤Power of authority in case the party is representing someone else;
➤If the party is a company, the authority letter, along with a copy of the resolution of the company’s board of directors authorizing it to proceed with the registration;
➤Incorporation Certificate;
➤Property Card;
➤Proof of payment of stamp duty and registration fees.

The documents that must be compulsorily registered must be presented within four months from the execution date, together with the required fees. In case the deadline has expired, you can apply to the sub-registrar for the delay’s tolerance in the next four months, and the clerk to register these documents upon payment of the fine. The registration fee for property documents is 1% of the property valuation, subject to a maximum of Rs.30,000.

You must follow these steps before registering your property:

1. Encumbrances: Is something that creates difficulties in transferring the property’s registration details from one owner to another, for example, an outstanding mortgage, property rights, unpaid property tax, etc. A buyer may intervene in the property before purchasing;

2. Chain of Documents: Any buyer must check the documents’ entire chain before purchasing a property. The chain of documents is the documents that specify when and how the property is transferred from one owner to another;

3. Payment of Assessments: Any property must be free of any arrears such as property tax, electric bills, or water bills. It is the buyer’s responsibility to verify this before the property is registered;

4. Preparation of the deed: A draft deed should be prepared on which the detailed information of all the parties involved and the property concerned as well as the terms and conditions that are to be executed should be mentioned obviously before registering the work;

5. Calculation of Stamp Duty: Stamp duty charges are charged by the government and vary from state to state. Stamp duty is calculated based on the market value of the property concerned.

After completing these steps, the deed’s execution takes place at the office of the deputy registrar under whose jurisdiction the deed comes based on the signatures or thumbprints of the parties involved.

Here are some of the property registration benefits:

➤ Application for Transfer of Title:
The transfer is the change of title ownership from one person to another. Because of the significance of the transfer, the new owner’s property is registered in his or her name in the Land Revenue Department. It also allows the government to levy a property tax on the rightful owner.
The city’s Department of Surveys and Land Records is the authority for transfer applications. After evaluating the request for a change, the city’s Department of Surveys and Land Records decides on the property value tax and finally issues a transfer letter in favor of the purchaser.

➤ Tax benefit:
Under Section 80C of the IT Act, an assesses can deduct stamp duty, registration fees, and other expenses to acquire a house. This deduction is applied to the total gross income. The maximum deduction limit under section 80C is Rs 1 lakh per financial year.
A registered title gives a quick and up-to-date official record of who owns the land and individuals, what is owned in the common man case does not need to do any research on the history of the title to the land.
A registered title is a guarantee of the state. If you have suffered the loss of a property interest in the land ownership information due to an error or omission in the registry by the registrar, you may be able to obtain compensation.
Disputes over ownership of land rights can be resolved more easily. Once registered by the plan, each land title is delivered to a planning agent and can be used to prevent trespassing on boundaries.

Stamp duty is not required to be paid on the power of attorney in many states in India. This is the reason why in many cases related to property transactions, people get a power of attorney instead of doing the sale deed to save money on stamp duty.

Power of attorney is a process in which a person transfers his property rights to another person. However, it should be kept in mind that only property rights are available in the power of attorney. Therefore, the power of attorney can be used for ownership. However, in power of attorney, the property legally belongs to the person in whose name the property has been registered.

Therefore, the power of attorney rule is such that after the death of the person from whom you buy a property, this power of attorney will be automatically canceled. In such a situation, the children or next of kin of that person can assert their right to that property, which gives you the ownership rights only. The Power of Attorney never gives ownership of the property to anyone. Therefore, at the time of the property’s purchase, you must register the property by paying stamp duty.

Buying land requires some extra precautions compared to buying a ready-made house. Land buyers need to be carefully vetted before finalizing a deal.

Every person certainly wants to buy a property in their lifetime. The land cost is much higher than any real estate because of its high returns. It gives freedom to the buyer to choose the design, layout, and floor plan, but it is necessary to conduct a thorough investigation when buying the land:

The most significant thing to keep in mind when buying land is that you need to check the title. This means that you need to know that the person selling you the land is the true property owner and has all the rights. It is advisable to consult a lawyer to have the seller’s title confirmed by having the deed and property tax receipts verified. Generally, keeping in mind the land complexity records and the limitations of claiming ownership, it is correct to trace titles back 30 years.

Before purchasing a property, it is advisable to give public notice in the local newspapers inviting any claims on the land offered for purchase. This will let you know if there are any third-party rights to the land.

This search presents the transactions and charges on the land to be acquired. Each state has a different methodology for searching the sub-registrar’s offices for example, in Bengaluru, the sub-registrar issues the charge certificate, while in Maharashtra, an attorney or someone experienced in manual searches at the sub-registrar’s office issues the report. One should check with the concerned authorities for legal documents before dealing with the property.

You should check these documents and legal factors before buying a land:

Before closing the sale transaction, make sure to check whether the original title documents related to the land transaction are correct or not. This will show that the seller has not created any third-party rights with the original. After the sale transaction completion, take these original documents:

1. Land Purchase Approval and Authorization:
If the property/land that is part of the sale transaction already has structures or buildings, it is pertinent to check if the approved plans, and required permits are in order. Factors such as inheritance rules, and road widening constraints, which will apply to certain buildings, should also be considered.

2. Taxes and accounts in the purchase of land:
Before purchasing the land, the purchaser must ensure that the property tax has been paid up to the transfer date and that the original receipts for this payment are ready to be checked. It is also necessary to ensure that the account (income record showing the owner’s name) is available in the seller’s name.

3. Legal Rules for the Purchase of Land:
The buyer of the land must ensure that the local rules do not impose any restrictions on the land purchase. For example, in Karnataka, a non-agricultural scientist (who does not own agricultural land), companies, businesses, and individuals with an income of more than Rs 25,00,000 cannot buy agricultural land. But in some other states, these rules have been relaxed. Therefore, before buying any land, it is imperative to consult a lawyer.

4. Land’s Duration:
When purchasing land, consider the land’s term. If the land is leased and the term of the lease is short and if there is no renewal clause on the same old rent, then the additional rent may be due by the land’s purchaser. There is also a strong possibility that there is no new clause for the property.

5. Mortgaged land:
It may also happen that the seller has taken out a loan with the bank by mortgaging the land. The buyer must ensure that the seller has paid all the charges on the land. A release certificate from the bank is required to determine that the land is free of all debts.

6. Measuring the ground:
Buyers are advised to measure the land before registering in their name. To ensure that the measurements and boundaries of the land are accurate, the buyer should do so with the help of a recognized surveyor. You can also compare the accuracy by obtaining the survey sketch of the land from the land surveyor.

7. Floor Space Index (FSI):
The FSI indicates the amount of construction that can be done on a lot. The FSI is determined by the State Department of Land and City Planning. It also depends on the location of the parcel.
Regarding the amount of FSI allowable on the land, you should inquire with the seller or property’s owner. Also, it is significant to hire a property lawyer for the documents’ verification and the project’s validity.

In India, the tax calculation varies from state to state. There is no rule of thumb as to the different formulas used to calculate the tax in India. The tax calculation considers several factors such as the type of property, location of the property, occupancy status (independent or tenant), floor area and carpeting, number of floors built, etc.

The main methods used in India for calculating taxes are as follows:

the municipal authorities of Finance Capital (Mumbai) calculate the tax using this formula. In this system, tax is levied as a percentage of the market value of the property. Depending on the property’s location, the state government determines the property’s market value on an annual basis and makes it public on various platforms.

The municipalities of Kolkata, Delhi, Patna, and Bengaluru use this system for calculating the tax. The tax is calculated on the property’s built-up area prices per unit. Moreover, the unit price is calculated based on its use, location, and land cost. In addition, to determine the actual amount of tax, the calculated unit value is multiplied by the total built-up area of the property.

Also known as the assessed value system, this method is used by cities such as Chennai and Hyderabad to calculate the tax. In this system, the property’s annual rental value is considered for the tax calculation. Moreover, the property’s rental value is not calculated based on the rent charged on the property but is a value that is decided by the municipal authority based on the property’s size, characteristics, location, and sites.

You can pay property tax at the municipal office in the area where your property is located. In addition, many municipalities have links with various banks that accept property tax payments. As India moves toward a fully digital nation, many municipal corporations also collect taxes online through their official websites. When paying property tax online, you should keep the property tax number or income survey number legend handy.

There are always exceptions, and you can apply for a property tax exemption based on the following factors:.

Also, if you have a vacant lot, you will not have to pay property tax. For more information, you should contact either the Municipality or the relevant administrative authority in your community.

Market conditions play an important role in the decision to buy a property. In India, the economy has collapsed due to Covid-19, resulting in a fall in property prices. In such a situation, if you are considering buying a property, this may be the right time:

Given the current market conditions, low demand has led to a drop in real estate prices. Real estate prices have started to rise, but they remain low compared to the pre-covid era.

Currently, interest rates are at an all-time low. To support the economy, the RBI has cut the repo rate by 115 basis points, which has reduced interest rates. Lenders are offering home loans as low as 6.50 percent. The low-interest rate is one such benefit that will help you save money when buying a home.

Some of the major banks have waived processing fees on home loans. Even though they charge, the processing fee is lower than before.

States like Maharashtra have temporarily reduced the stamp duty, and some other states have also reduced the stamp duty on properties. For example, if you buy a property in Mumbai for Rs 25 lakh, you will have to pay a 3% stamp duty, bringing the stamp duty to Rs 75,000. Previously, at that time, the stamp duty was 5%.