Land Purchase Agreement

A land contract is an agreement between a buyer and a seller regarding a specific piece of land. Developers advertise and sell land, similar to the process of selling real estate. Land contracts can be broad in scope and include both land and real estate on a lot. Many land contracts involve seller-financed purchases. Some borrowers who purchase land may also finance the purchase with a bank loan.

A land contract details the specific terms associated with the property purchase. Land contracts can be broad in scope in some states, which have more liberal legal rights for land contract holders than others. Therefore, the land buyer must ensure that the contract’s terms are legally binding in the event of a dispute in the future.
Land contracts are often structured with seller financing. This can provide a broader universe of eligible borrowers, as seller financing can sometimes allow buyers who would otherwise not be eligible for a mortgage, or investors who want a faster purchase than a mortgage. Seller financing reduces the number of entities involved in the asset’s sale. Seller financing allows the buyer to purchase a property directly from the seller instead of paying an upfront payment. In a seller financing agreement, the seller determines the interest rate required, the agreement’s term, and any down payments.

Seller-financed land contracts may include a parcel of land, or they may include land and any property located on the land. Assets included in a land contract may include a dwelling house, swimming pool, tennis court, basketball court, barn, or riding ring. The price of any asset located on the land and included in the land contract will be affected. The seller holds ownership of all assets until full payment is made, at which time the title is transferred.

Land contracts are often financed by the seller. However, in some cases, a borrower may seek traditional bank financing for a land contract. A borrower wishing to build on land wishes to finance the property with bank loans. The land loan’s terms will generally include a higher interest rate and are usually based on a shorter term. Land loans will also often be structured with a lump sum payment instead of regular installment payments. Often, builders who obtain a loan for land for real estate construction with the highest established collateral value can refinance or pay off the loan with a loan.

The sale agreement signing becomes important under several factors. Firstly, it is legal proof of an agreement between the buyer and the seller, based on which, in case of a dispute, the next step will be decided.
As such, both parties must abide by the terms and conditions outlined in the sales agreement. If one party does not agree to any of the terms written in the agreement, the other party can take it to court if it wishes. All parties should also note that this document can be produced in court as legal evidence and that all parties are legally bound by it. In addition, if you are applying for a home loan, the bank will only accept your application if you sign a sale agreement.

According to Article 9 of the Law on Transfer of Property, the title can be transferred by verbal agreement, but unless the law explicitly states that a written agreement must be drawn up to consummate the transaction. In the case of real estate with a value of less than Rs 100, such transfer must be effected by a registered deed or by the property delivery.

Here are the most significant documents and legal factors to check before buying land:

India covers an area of 3,287,263 square kilometers. There are different types of land in India, of which about 54.7% is cultivated land. The different types of land available in India are:

➤ Agricultural land:
Indians are mainly employed in agricultural activities. Thus, agricultural land accounts for nearly 54.7% of the total landmass. Agricultural land is located on the outskirts of metropolitan cities. Usually, agricultural land shares space with industrial areas outside the city. There is agricultural land in almost every state in India.

➤ Dry Land:
In the landmass of India, mainly the land areas of Rajasthan, parts of Jammu, Leh, and parts where snowfall prevents any cultivation are barren.

➤ Real estate:
Real estate is developing at a rapid pace in India. All the metropolitan cities are witnessing a huge boom in real estate properties due to the growing economy, new industries, information technology, and outsourcing of business. As people become mobile due to portable jobs, the growth of houses and apartments has multiplied across India. In addition, the NRI and business groups have found real estate land as a good investment area.

➤ Commercial Land:
Commercial land is becoming more expensive by the day. All Indian cities are suddenly experiencing a boom in markets, marketplaces, malls, and shopping complexes as all international brands are making their presence felt in India in a big way with many new local retailers.

➤ Agricultural land:
Agricultural land is becoming the exclusive property of the rich and famous as in recent times they have realized the unique qualities of agricultural land. There is fierce competition to acquire the best farmland, as it can be found within picturesque valleys teeming with streams, a private piece of beach in Goa, Pondicherry, or private Havelis in Rajasthan.

➤ Residential Land:
With the trend of love for nature and due to the lack of space available in urban apartments, agricultural land is fast becoming the best investment option. Residential land is fast becoming scarce in the mad rush to stay close to workplaces and the city center. Thus, upscale places or places with less space have developed apartments to accommodate more people. Indiahousing.com provides all the information about the land types in India.

Agricultural land, plantations, or farmhouses’ ownership is only permitted by an Indian citizen living in India. Even then, depending on state laws, the buyer may need to prove that he or she is a farmer or has other close ties to the land. This means that foreign owners are prohibited from purchasing an agricultural property of any kind.

Before buying land, the buyer must ensure that the property tax has been paid up to the transfer date and that the original receipts of such payment are ready for verification. It is also necessary to ensure that the account (income record showing the name of the owner) is available in the seller’s name.

There are two types of farmlands. The first is urban farmland. The second is rural farmland, which farmers cultivate. There is no tax obligation on the sale of rural land. Therefore, no taxes are levied on the sale of agricultural land in rural areas.
However, if the farmland is urban, certain conditions apply. First, it is not tax-exempt like land in rural areas. But you can save tax under Section 54B. To decide whether the land is urban or rural, the rule for this is that the land is within eight kilometers of the boundaries of the municipality or municipal corporation with a population of more than 10 lakhs. If the value of such land is between 1 lakh and 10 lakhs, it will not be considered rural agricultural land. The amount received from the sale of land will be taxed. To save tax, you must either invest in a house (Section 54F) or reinvest in agricultural land.

Here are the requirements for the Section 54B exemption:

There is no such term as good property or bad property. If there is a property that has met your needs, whether it is commercial or residential, it is a good property. Now, it is also a good property only if the return on investment has been good with decent capital appreciation.

Here are some tips on how to properly choose your land:

While finding land to build a home for a lifetime is a unique process that each family adapts. You may want to consider the following tips for buying land to build on:

1. Check the locality
It is significant to check with the delegation or municipality that you have permission to build in the area. Look for factories that pollute the air, dumps, or oil or gas pipelines nearby.
It is essential to detect the connection to main roads/streets and the general safety of the area. If the lot is far from town, consider how long it will take to access services such as hospitals, pharmacies, schools, recreation areas, and stores. Keep in mind that a good lot is well connected to the urban core. You should also think about the increase in land value in the future.

2. Check the property’s status
Before buying a land, make sure that the person offering the property has all the deeds proving its registration. Check that the measurements, assessed value, and data they are offering are the same as described in the document. Verify that the property does not have any outstanding mortgages or liens.

3. Verify documentation and land use
Carefully read the information in the document that matches the descriptions of your new land. Check that you have the authorization to build, the type of construction allowed, and the property assessment, whether residential, commercial, or mixed, in the delegation or district office that corresponds. If the land you want to acquire does not have a housing permit, and your dream is to build a house, you should give up and look elsewhere.

4. Check the surroundings
When buying a piece of land, you should look not only at the land’s physical characteristics but also at the external effects that may be present. Carefully check that the land is located away from the fire zone, pylons, and power lines before you buy.

5. Check for possible damages or fees
It is significant to check if the land is affected by any easements such as the future opening of a pass or street on one side of the parcel. You should check that there should be no outstanding debts of the owner with the bank.

6. Accessibility and infrastructure
It is essential to make sure that the land is well accessible by foot and car and that it is close to public transportation. In addition to communication, you should consider proximity to schools, shopping centers, supermarkets, or other public services, as well as ease of access to water, electricity, or gas connections.

Buying land and building on it is not an easy task, but once you take care of the above-mentioned points, only you can make a perfect investment on land for sale to build a house.

Investing in any form of real estate involves a careful, step-by-step procedure. A slight mistake can lead to many legal hassles, impacting you in the later stages of the investment. The same is true for agricultural land in India.

Farmland promises lucrative returns in the long run. However, if a decision is made in haste, such miscalculated steps can result in a significant loss. A person could easily be misled if he/she does not have the required knowledge about the legal procedures involved in buying agricultural land in India. Therefore, it is always advisable to do your homework and learn about the various legal procedures involved before embarking on the agricultural land purchase.

Here are some significant legal tips to consider when buying farmland in India:

1. Check the farmland’s title to verify ownership:
The title to the land confirms the seller’s name and verifies whether the seller has the right to sell the property. Suppose the current title and the previous title have more than one owner for the existing farmland. In this case, it is suggested to have it reviewed by a lawyer before registering the documents to ensure that the owner has not given access to others through the land.

2. Verify the documents and sign a land sale agreement:
After checking all the documents, the seller and the buyer draw up and sign a written document that mentions the deposit’s amount, the balance’s payment, and the actual sales period, all of which must be signed under the supervision of a lawyer and two witnesses. This is an essential part of buying farmland. Therefore, one should be extremely careful and read the terms and clauses carefully before signing the agreement.

3. Find out about stamp duty on the land:
Stamp duty is another property purchase essential aspect. Stamp duty is nothing, but the tax imposed by the government on a property, and the stamp duty imposed by the government on land vary from state to state. It is also a legal document that can be used in court.

4. Documents required for land registration:
The land registration is a document that states the ownership transfer to the new buyer and must be signed by both parties at the registrar’s office. According to the Indian Registration Act 1908, the deed is supposed to be registered at the Sub-Registrar’s office, and documents such as property tax receipts, previous deeds, and the original deed, along with two witnesses, are required at the time of land registration.

5. Land Sale/Transfer’s Deed:
This deed is a document that transfers ownership from the seller to the buyer. These documents also include all required details such as location, measurement, and boundary details.

6. Retrieving the Survey and Measurement Certificate:
This document assures the buyer that the farmland is free from any legal hassles or complaints. The Encumbrance Certificate can be obtained from the Sub-Registrar’s office.

7. Make sure there are no outstanding tax receipts and land records:
Before embarking on the property purchase, the buyer should ensure that there are no outstanding bills or notices relating to the land. They should verify that the water, electricity, or other bills are clear and up to date.

8. Changing the title to farmland:
After completing all the legal procedures and vital aspects of the purchase of farmland, the name of the new owner of the land is added to the Village Office Registry.