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Indian Real Estate Laws: Indian Transfer of Property Act & Indian Registration Act

As you would notice from the posts on this website, there are different kinds of rules for different kinds of real estate investing in India.

If all you want to do is buy an apartment for yourself, its straight forward. But its different if you want to build an apartment complex or township or SEZ (special economic zone) with FDI (foreign direct investment) or ECB (external commercial borrowing).

Please refer this post: RBI Guidelines for FDI and ECB in Indian Real Estate

Investing in real estate in India requires compliance with various laws, some 100 years old and some new. In addition to Central Govt laws, there are state laws governing real estate transactions and investment.

The Central laws governing real estate include:

Indian Transfer of Property Act

The Transfer of Property Act governs the transfer of property by various means. Sales, mortgages (other than by way of deposit of title deeds) and exchanges of immovable property are required to be registered by virtue of the Transfer of Property Act. Therefore, all the above documents must be in writing and registered.

Indian Registration Act, 1908

The purpose of this Act is the conservation of evidence, assurances, title, publication of documents and prevention of fraud. It details the formalities for registering an instrument. Instruments which require mandatory registration include:

  • (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, to or in immovable property;
  • (c) non-testamentary instruments which acknowledge the receipt or payment of any consideration on account of instruments in (2) above.
  • (d) leases of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent

Sales, mortgages (other than by way of deposit of title deeds) and exchanges of immovable property are required to be registered by virtue of the Transfer of Property Act. So all the above documents have to be in writing.

Section 17 of the Act provides for optional registration. An unregistered document will not affect the property comprised in it, nor be received as evidence of any transaction affecting such property (except as evidence of a contract in a suit for specific performance or as evidence of part-performance under the Transfer of Property Act or as collateral), unless it has been registered.

Thus the doctrine of part performance dealt with under Section 53 A of the Transfer of Property Act and the provision of Section 49 of the Registration Act (which provide that an unregistered document cannot be admissible as evidence in a court of law except as secondary evidence under the Indian Evidence Act) together protect the buyer in possession of an unregistered sale deed and cannot be dispossessed. The net effect has been that a large number of property transactions have been accomplished without proper registration.

Instruments such as Agreement to Sell, General Power of Attorney and Will have been indiscriminately used to effect change of ownership. Therefore, investors in real estate have to be careful in their due diligence.

Therfore, establishing “Clear Title” on your desired Indian Real Estate is more complex and time-consuming than it is in America or Europe. Please factor this in your due-diligence.

Reference: http://www.madaan.com/realestate.html

Comments

Comment from yagnesh k. pathak
Time: August 23, 2009, 6:02 am

its very good but you should briefly mention sec-41, 42 of transfer of property act as well the duties of buyer’s and seller’s so thay should understand it properly.. b’coz india real estate business is now at it’s golden period and the difficulty of the common people while buying and selling must be easy for each and every person… thanks..

Comment from Realestate Developer
Time: August 17, 2010, 9:20 am

Good informative post. After visiting this post customer and property agents will be aware of various property transfers, property registration act etc. People, who are looking for the property in India, for commercial or residential purpose, can visit this site or can call at 0120-4338222 for any query or detail about the price payment plans or location etc.

Comment from lokman dass goyal
Time: June 14, 2011, 4:29 pm

Its very good information post,but it is to sort, realstate Developer information must to bound to give Aparment/house/land whch ever consumer requer/demand and booked by the developer he/she connot refused for allotment .etc.

Comment from lokman dass goyal
Time: June 14, 2011, 4:31 pm

thanks for giveing this information to public

Comment from Prashant Chavan
Time: November 20, 2011, 11:11 am

Can a registered Gift Deed in Mumbai, Maharashtra transferring a house property by the wife of the Owner in whose name the property has been transferred after the original Owner’s death by the Society, to her minor grandson be revoked by law ? If yes, please cite the relevant case laws for such revocation.

Comment from Kirti Patel
Time: February 22, 2012, 3:54 am

I reside in USA and I own a property in Mumbai, which has been rented. Presently I can not come to India to have the Leave & Licence Agreement registered at the Registrar’s Office. I have a a Power of Attorney in Rajkot, Gujrat and he is not able to leave his wife due to her health and come to Mumbai to get the matter registered. Is there any way I can do this through Indian Consulate in USA? The lease is to be renewed on 1 March 2012. Please call me and I will call you back with the numb er you provide me.

Comment from Naresh Patel
Time: March 8, 2012, 2:54 am

Hi, we are the seller of the agriculture land in Gujarat, India. There are four title holders on this property. Two of the four title holders signed a sales agreement on a very basic and simple piece of handwritten notebook paper. The paper that it was written on is not registered nor has it any revenue stamps. The buyers of the deal started a private dispute with the title holders over a personal matter before their first payment and since have not payed any payments. The buyers then published a written document in the local newspaper. After that the buyers filed a lawsuit against the title holders. The local district court has ruled in the buyers favor and issued a stay order against the title holders.

My question is if the document that the two title holders signed should hold up in court or even be admissible in court as it contains only two of the four total title holders for this property and it was written on a crude piece of paper with no certifications for any legality?

Could the Property Registration Act have any affect on this case that has not been applied, and if so what section of the act would apply to this case?

Comment from Indian Real Estate Advisor
Time: March 10, 2012, 8:05 pm

Dear Naresh, following is the reply to your question by Sandeep Saxena, Director of Big India Farms, who has significant experience in land deals and legalities in India, and whose expertise is valued by many investors in India.
——————————————–
The details given are very crude and we need more info. But whatever has been given, we can say that:
– The signed agreement is just a mutual agreement between 2 sellers and buyers and can be used as a contract between 2 parties.
– The above contract has NO significance in land registration act but if “both” parties accept that they entered into a contract, then court will take it as one while even if it is a verbal contract and not written. Logically, why will judge have anything to ask if both parties accept its a contract.
– The above document cannot be used to force any land transfer mutually or by administration but can be done so by a court.

Prima facie with very limited details , it appears to be a seller fault or lack of legal knowledge, else no court grants stay so easily.

Now my questions on details:
– How is the property divided between 4?
– Is it ancestral or earned?
– Is it a property under ‘prakosht’ (apartment or urban construction) or is it a plot or agri land?
– Did the two sign an agreement for their part or for all 4 (a criminal act)?
– What is the intent or stay or the prayer of the buyers to the court?
– Why didn’t the sellers refuse or dispute the document rather than allowing it to be admitted as an evidence?
– Has any part of registration OR possession transfer happened in registrar office?
– What is the level of court – tehsil / SDM/ local civil?
– WHO has possession today?

Basically, the document is not valid under the ‘property registration act’ but can be held valid under ‘contract and easement act’. If one of the party disputes that they did not enter into this contract, then they have to file a criminal case against the other for forgery and lying. If they don’t dispute it, then they have to question if it was followed as agreed by the other party. If they do neither, then obviously judge has very limited points to debate.

Comment from Naresh Patel
Time: March 11, 2012, 2:40 am

Thank you for your help i can give the info you have requested.

– How is the property divided between 4?
Not divided.

– Is it ancestral or earned?
ancestral

– Is it a property under ‘prakosht’ (apartment or urban construction) or is it a plot or agri land?
agriland

– Did the two sign an agreement for their part or for all 4 (a criminal act)?
2 signed the agreement with an oral agreement with the buyer that the contract will not be upheld until the other 2 signed. The other 2 sellers that signed received tokens under the condition that if the other 2 sellers(not signed yet) do not sign the tokens would be given back and the agreement nullified.

– What is the intent or stay or the prayer of the buyers to the court?
The buyers wanted the deal to go through after the 2 sellers that had not signed yet refused to sign. they want the agreement upheld that was written ignoring the oral agreement of getting all necessary signatures.

– Why didn’t the sellers refuse or dispute the document rather than allowing it to be admitted as an evidence?
possibly bad legal advice

– Has any part of registration OR possession transfer happened in registrar office?
no

– What is the level of court – tehsil / SDM/ local civil?
local civil

– WHO has possession today?
seller

Comment from gisela weidert
Time: April 19, 2012, 7:56 am

In India, can an Indian citizen transfer his property via gift deed to a non-indian ?

Comment from Indian Real Estate Advisor
Time: April 19, 2012, 12:13 pm

Dear Gisela, thanks for asking.
An Indian citizen transfer his property via gift deed to a non-Indian, but only for urban/commercial property, not for agri land. Non-Indian nationals can not own agri land in India. Hope this helps.
Best Wishes/Shankar

Comment from Santhosh kumar
Time: April 25, 2012, 12:12 pm

Hi,

I have a residencial plot (1200sqft) in bangalore. and i am planning to construct a house on it.

My question is, what is the maximum allowed area of the house can be built on the plot? e.g. is it legally allowed to construct a house of 2600sqft area in the 1200sqft plot?

Thanks,
Santhosh

Comment from Kadri Harunrashid
Time: June 28, 2012, 3:02 am

Whether leased property can be mortgaged by the lessee to raise the loan from bank? Please clarify and suggest alternatives if any for lessee to raise loan without mortgage.

Comment from sanghita chakraborty
Time: July 13, 2012, 4:44 am

what is deed of conveyance?

what is indenture of conveyance?

Comment from sanghita chakraborty
Time: July 13, 2012, 4:47 am

what are the documents required to start a resort project ?

Comment from sanghita chakraborty
Time: July 13, 2012, 4:49 am

what are the documents required to develop residential flats ?

Comment from sanghita chakraborty
Time: July 13, 2012, 4:51 am

what are the documents required to start a holiday resort project ?

Comment from Jayesh
Time: August 11, 2012, 4:48 am

Hi my father has sold more than 35 years old flat and i want to know whether my father can buy any property on any other person than him or should be one property only at one place instead of 2 or 3 as i have come to know that only he can buy on his name and only one residential property of full white amount or need to pay 20% tax..Kindly guide me..Thanks

Comment from piyush
Time: August 14, 2012, 6:06 am

I want to in society temple in which zone does come

Comment from G Meera
Time: March 23, 2014, 6:28 pm

When my paternal grandfather died, he willed his house to my mother, his daughter-in-law. My grandfather’s second son, my paternal uncle, did not inherit any part of the house, so he filed a law suit contesting the will. He lost, appealed and lost again.

The heirs of my paternal uncle have continued to appeal over a period of 25+ years. During that time, my mother, father and paternal uncle have died. The paternal uncle’s wife and children have moved away.

The vacant house in cad condition and parts of it have been torn down. My brothers do not want to maintain the house in case they ever lose one of the never-ending appeals.

My question is how long can my uncle’s family continue to appeal after losing so many times. When can this finally be resolved so a new house can be built? What good is a judgment in your favor when it can be appealed for many generations?

Comment from G Meera
Time: March 23, 2014, 6:29 pm

The property in the previous post is in Tuticorin, Tamil Nadu

Comment from Ajaya Kumar Dash
Time: September 13, 2014, 7:38 am

I have booked a flat having S.B.A 1550 sq.ft for total consideration value of Rs.30,00,000/- on dt.24.09.11 from the builder and accordingly registered sale agreement without possession was executed between myself and builder on the same date. As per the schedule payment conditions I have paid Rs.26,50,000/- through cheques to the builder which was duly acknowledged and money receipt were given by the builder in different date and as per the schedule payments condition of Regd. Sale Agreement balance amount Rs3,50,000/- to be paid at the time of Regd.sale deed and handover the possession of the said flat by the builder.

When I came to know the builder is negotiating with other person for creation of 3rd party interest in the same flat, I have issued notice of Demand through Regd.post with A.D on dt.16.07.2013 to the builder for registration of sale deed and handover the possession in my favor of the said flat which was duly delivered to the builder on dt.19.07.13. But the builder with illegal motive and committing breach of trust made sale deed of the same flat (my booking flat) to another lady on dt.10.12.2013, but builder failed to give physical delivery of possession to her due to my strong protest .
When I proceeded to file criminal complain case as well as suit for specific performance of contract, the builder made request to compromise the above matters and promises verbally to refund Rs.45,10,000/- to me for cancellation of the Regd.Sale Agreement on dt.24.09.11 and handover cheque of Rs.15,10,000/- towards the part payment out of Rs.45,10,000/-.

I have deposited the above said cheque through my banker on dt.26.05.14 but dishonoured on the ground of Funds Insufficient in the builder account and I have issued demand notice u/s 138 of N.I Act through Regd.post with A.D which was delivered on dt.23.06.2014 but builder fails to pay the Rs.15,10,000/-within 15 days from the receipt of my demand notice and accordingly I have filed ICC case under sec 138 of N.I Act in the appropriate court in the specified time.

Kindly suggest me the remedies available in law so that sale deed can be made in my favor through court and the fraudulent sale deed executed by the builder will be declared as null and void along with other criminal steps to be taken against the builder.
With regards,

Ajaya Kumar Dash

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