Navigating Property Laws in India: A Homebuyer’s Legal Guide

INTRODUCTION

Buying a home in India can feel like navigating a maze of many property laws and regulations. This guide will help you understand the broad aspect about the property laws. We break down the key laws you need to know, from The Transfer of Property Act, 1881 , RERA(Real Estate Regulation and development Act , so you can understand what they mean for you as a home buyer. We will guide you through due diligence, explain important documents like sale deed and title certificate and explain the registration process. You can also learn about mortgage underwriting, your rights and responsibilities, and what to do in case of a dispute. Whether you’re a first-time buyer or looking to invest, this guide contains practical tips and insights to help you buy your home with confidence and peace of mind. We make your journey to home ownership smooth and experienced!

TYPES OF REAL ESTATE

1. Residential property

Definition: A residential building is a real estate intended for living. These include houses, apartments, villas and other residential properties.

Example: Housing in Mumbai: Suppose you are buying a 2 bedroom flat in a residential building in Mumbai. This property is intended for personal use and provides living space for you and your family.

Note: Regulations: Local Government Regulations and RERA (Real Estate Regulatory and Development Act) Regulations. Use: mainly for residential use; its conversion to commercial use may require permission from local authorities.

• Commercial Property

Definition: Commercial premises are used for commercial purposes such as offices, shops, warehouses and hotels.

Example: Office space in Bangalore: If you buy office space in a commercial building in Bangalore to begin with, it is a commercial property.

Please note:Rules: Commercial zoning laws apply, which differ from residential zoning laws. It is important to follow various business rules and building codes.Usage: Intended for business; its use as a residence may be prohibited.

• Freehold Property

Definition: Freehold property refers to property where the owner has complete control of the land and building without time limits.

Example: Independent House in Delhi: You buy an independent house in a residential colony in Delhi. As the owner of the property, you have an indefinite right to the land and its building.

Please note: Ownership rights: Full ownership of the land and building and the right to transfer, rent or sell the property at their discretion. Transferability: Transferring ownership is easier because it does not require government approval.

• Leasehold Property

Definition: Leasehold property refers to the ownership of real estate where the land is leased for a period of time, usually 30 to 99 years. After the lease period, ownership reverts to the original owner or it is possible to renew the lease.

Example:  Apartment in a DDA Colony in Delhi: You buy an apartment in a DDA (Delhi Development Authority) colony on a 99-year lease. You own the property, but the land is leased from the state.

Note: Ownership: Limited to rental period. The tenant owns the building but not the land. Transfer: Permission from a lessee (eg DDA or private entity) is often required to sell a leased property.

LEGAL FRAMEWORK GOVERNING PROPERTY TRANSACTION

Transfer of Property Act, 1882

1. The Transfer of Property Act, 1882 is the main body of Indian law that governs the transfer of property between living persons. The purpose of this law, which came into effect on July 1, 1882, is to regulate and facilitate the legal order of property transactions. It applies to immovable property such as land and buildings and, in certain cases, movable property. The law defines basic terms such as transfer of property, claims and types of transfer including sale, mortgage, lease, exchange and gift.

• One of the critical aspects of the law is the regulation of how and under what conditions the transfer of property must take place in order for it to be valid. It requires transfers by competent persons for legal purposes and through recognized legal means. For example, the sale of immovable property must be done with a registered sale and fee attached to it.

• The real estate must also be donated through a written and registered document.The law also defines the rights and obligations of donors and recipients. For example, in a transaction, the seller must disclose material defects in the property, while the buyer is responsible for clarifying ownership of the property. In the case of a mortgage, the mortgagor has the right to redeem the property after repayment of the debt, while the mortgagor has the right to sell the property in case of insolvency.

• The law also deals with issues such as the transfer of property to an unborn person, the doctrine of partial performance and the rule against binding property forever. The Transfer of Property Act 1882 ensures clarity, fairness and predictability in real estate transactions by providing a comprehensive legal framework, thus protecting the interests of all parties involved.

Real Estate (Regulation and Development) Act, 2016 (RERA)

The Indian Contract Act, 1872

• The law of contract is the most important branch of Mercantile Law. Without such a law it would be difficult, if not impossible, to carry on any trade or business in a smooth manner. The law of contract is applicable not only to business but also to all day-to-day personal dealings. In fact, each one of us enters into a number of contracts from sunrise to sunset. When a person buys a newspaper or rides a bus or purchases goods or gives his radio for repairs or borrows a book from library, he is actually entering into a contract. All these transactions are subject to the provisions of the law of contract.

• The term business law refers to those rules which govern and regulate business transactions. These rules, regulations etc bring a sense of seriousness and definiteness in business dealings. They provide for rules regardin2/g the validity of making contracts and their performances. INDIAN CONTRACT ACT, 1872

• In the year 1861,the third law commission of British India under the chairmanship of Sir John Romily presented the report on contract law for India .The law commission submitted a draft on 28th July 1866.The draft contract law after several amendments was enacted as The Act 9 of 1872 on 25th April 1872 and the INDIAN CONTRACT ACT 1872 came into force w.e.f1 st September 1872.The Indian Contract Act, 1872 is one of the oldest in the Indian law regime, passed by the legislature of pre-independence India; it received its assent on 25th April 1872. The statute contains essential principles for formation of contract along with law relating to indemnity, guarantee, bailment, pledge and agency.

DOCUMENTATION PROCESS

SALE DEED

• A deed of sale is a definitive legal document that confirms the transfer of ownership from the seller to the buyer. It contains detailed descriptions of the property, the purchase price and the terms agreed between both parties. Important parts of the sale deed are the identity of the buyer and the seller, a detailed description of the property, the purchase price, terms of payment and confirmation that the property is free of encumbrances.

• The sales contract must be drawn up in accordance with state law on stamped paper of the correct value and signed by both parties in the presence of two witnesses. Once it is executed, it must be registered with the local sub-registrar. Registration includes verification of identity of the parties, payment of registration fees and recording of transaction information in official documents.

• The sale is the main proof of the ownership of the buyer and is necessary for the legal transfer of the property. It protects the interests of both parties by clearly defining the terms of the transaction and provides a legal basis for resolving future disputes. Correct implementation and registration of the business book ensures the legality and security of business.

AGREEMENT TO SALE

• A sales contract is a preliminary agreement between a buyer and seller that specifies the terms on which the property will be sold. This is an important step before the final act of sale and helps ensure that both parties are clear about their responsibilities and the details of the transaction.
  
• The sales contract contains important elements such as the description of the property, the sales fee (price), payment terms and event schedule. It also defines the conditions that must be met before the final sale, such as obtaining the necessary permits or resolving legal issues with the property.
  
• This Agreement does not transfer title, but sets the stage for a future transfer. Legally, it obligates both parties to complete the transaction according to the agreed terms. If one party does not comply, the other party may seek legal remedies. For example, if the buyer does not pay the agreed amount by the deadline, the seller can keep the advance payment and cancel the contract.
  
• A sales document executed on stamped paper and signed by both parties provides legal protection and clarity, ensuring a smooth transition to the deed of sale and final transfer of ownership.

POSSESSTION CERTIFICATE

• A title is an essential document issued by the seller or developer that shows the transfer of ownership of the property to the buyer. This means that the buyer has taken physical possession of the property, although this does not mean legal ownership as evidenced by the sale.

• A certificate of title contains information such as a description of the property, the date of possession and details of the buyer and seller. It is usually delivered after completing all the payments and necessary formalities.

• For properties under construction, the builder will issue a certificate of title once construction is complete and all regulatory requirements have been met. In the case of ready-to-move-in properties, it is received when the seller hands over the keys and access to the property.

• Obtaining a Certificate of Title is important for several reasons:
• Certificate of Title: This serves as proof that the buyer has taken possession of the property, which can be important for legal and financial transactions.

• Electrical Connections: This is often needed to get electrical, water and gas connections.

• Home Loans: Lenders may require this certificate to release the last installment of a home loan.

REGISTRATION PROCESS

Registration Process Property registration is a crucial legal formality that ensures the legal transfer of ownership from the seller to the buyer. Here is the step by step of the process:

Preparation of documents:

• Collect important documents including sale, buyer and seller IDs, PAN cards and photographs.
• Make sure the deed of sale is drawn up according to state law on good quality non-judicial stamped paper.
• Payment of stamp duty and registration fees:
• Calculate and pay stamp duty and registration fees. These fees are usually a percentage of the sale value of the property and vary by state.
• Execution of the deed of sale: The sale must be signed by both the buyer and the seller in the presence of two witnesses. All parties must sign each page of the document.
• Appearance at the Sub-Registrar Office: Both parties and their witnesses must visit the local Sub-Registrar office for registration.
• Send the deed of sale and all required documents and payment receipts.
• Control and fixation: The sub-registrar controls the documents and persons of the parties.
• The details of the transaction are recorded in official accounting and the sale is registered. Receipt of registered sale: After registration, a copy of the registered sale is given to the buyer. This document is legal proof of ownership.

RIGHTS AND RESPONSIBLITIES OF BUYERS

RIGHTS:

• Right to release title: The buyer has the right to secure clear and marketable, unencumbered title to the property.
• Right of possession: The buyer has the right to take possession of the property according to the contract of sale.
• Right to information: Buyers can request all the information they need about a property, including legal, financial and structural information.
• Right to prompt delivery: The buyer of properties to be constructed is entitled to timely possession as per the agreed schedule.
• Right to compensation: Buyers can claim compensation for delays, defects or discrepancies in the property under the terms of the contract or RERA (Real Estate Regulatory and Development Act).

RESPONSIBILITIES:

• Due Diligence: Buyers must conduct thorough due diligence and review all legal and financial aspects of the property.
• Payment Compliance: Buyers must ensure that the purchase price, including all related fees and charges, is paid on time.
• Compliance with the terms of the contract: Buyers must comply with all the conditions stated in the sales contract.
• Registration: Buyers are responsible for ensuring that the property is properly registered in their name, which requires completing all necessary legal formalities.
• Maintenance and Taxes: After purchase, buyers must pay property taxes and ensure property maintenance.

DISPUTE RESOLUTION

Dispute ResolutionReal estate disputes can arise for a variety of reasons, including ownership issues, construction delays, and contractual differences. Effective dispute resolution mechanisms include:

• Negotiation: Direct negotiation between buyer and seller is often the first step. It aims to reach a peaceful solution without third parties.
• Mediation and Conciliation: An impartial third-party conciliator or mediator can help resolve disputes by facilitating discussions and proposing solutions.
• Arbitration: Arbitration involves a neutral arbitrator who hears both sides and makes a binding decision. This process is faster and less formal than going to court.
• Consumer forums: Homebuyers can go to consumer courts if they have issues such as unfair business practices or lack of service. These forums provide a platform for grievance redressed.
• Real Estate Regulatory Authority (RERA): In RERA, homebuyers can file complaints about delays, quality issues or contract violations. RERA aims to ensure accountability and transparency in the real estate sector.
• Civil court: As a last resort, disputes can be resolved in civil court. Although this process can be time-consuming and expensive, it is effective in resolving complex legal issues.

This article has been has submitted by YASH LODHA pursuing B.B.A LLb(h) from JAIPUR NATIONAL UNIVERSITY.