At last, you have made this decision to buy a resale property by investing your life's savings. In case of a property being bought from a builder, the registration process is typically guided by the builder's legal team. But if one is buying a resale property, at a lot of times seller or buyer aren't well versed with the documents that are needed or how the whole process works. As part of this post, we are trying to give an overall picture of the process and different aspects of buying a property as well as key things to know as a buyer.
As soon as you finalize a property based on your requirements and growth aspects, it is prudent on buyer's part to get property verification done from a real estate lawyer. This is to ascertain the legal ownership of the property, tax liabilities with the property and to ensure that it is complying with the various regulations. To read more on property verification please do read our other post on Buying a property! Should you trust your builder blindly?
Property Sale Agreement is probably the most important document in the whole chain because even sale deed is executed based on terms covered under sale agreement as well as is legally binding. Sale agreement covers various aspects of the sale such as Indemnity Clauses, agreed cost, advance paid, Penalty clause, Right to call-off the deal, the procedure to be followed in case of default by either party, losses or obligations to be covered by buyer or seller etc. In case the agreement is not well drafted, it may allow one of the parties to breach the agreement and still get away with it.
Since even sale deed is executed based on terms & conditions agreed upon in the sale agreement; hence it is all the more important to have an expert drafted and thoroughly vetted sale agreement. The sale agreement is also used for securing a home loan from banks.
Home Loan Processing
As soon as the sale agreement is signed, home loan process can be triggered with the bank. The first step in securing a home loan is to get the loan sanctioned for which bank would need to look at the income proofs, property marketability and the credit score of the buyer including security or guarantor documents (some of this might be bank specific). Bank would typically get into a tripartite agreement after the loan is sanctioned. The cheque or DD of the loan amount is issued in name of seller and once the property is registered original copies would be deposited with bank including entering a new mortgage agreement.
Another point of consideration here is the rate at which property should be registered. The government has a circle rate going for an area which typically would be less than the market rate. Govt. rate or circle rate is min rate using which the property stamp duty shall be calculated, in case of registration value being declared as less than circle rate. It is suggested to register the property at the market rate as it is the right way to do it as well as that would matter for loan eligibility as well.
The buyer is required to deduct the TDS of mandatory 1% from the sale proceeds (except for agricultural lands) if the property transaction value is in excess of 50Lacs. The buyer has the responsibility of deducting as well as depositing the amount with govt. before sale deed registration proceeds. Thankfully, buyer need not have a TAN (Tax Deduction Account Number) to pay TDS. TDS needs to be deducted at the time of payment to the seller and not at the time of execution of sale deed registration.
As part of the TDS payment, form 26QB is required to be filled & submitted online on the TIN NSDL site. Form 16B can be downloaded from TRACES website post the payment of TDS and needs to be issued to the seller within 15days of submitting "Challan". A seller can use this for the claim against one's tax liability for that financial year.
Affidavits and registered POA from Buyer/Seller
During the property sale purchase process, one may need specific affidavits or Power of Attorney to be executed in order to carry out the sale/purchase. The "Affidavit of Title" or "Seller's Affidavit" is one such affidavit issued by seller claiming the ownership of the property and capturing any known title issues like an existing lease agreement, liens or work on the property that may potentially cause disputes, boundary line issues of ownership, outstanding ownership issues from a will etc.
Power of Attorney is used to vest authority in another person (known as Agent) to represent oneself (known as Principal) in legal or financial matters. A valid and registered POA can be used to execute registration of a property in a capacity as a buyer or even seller.
Registration of Sale Deed
The sale deed is an instrument in writing which transfers the ownership of the property. Sale Deed is a document executed at the time of finalizing the sale deal. Registration of the property is the final step in the process as registration implies that the buyer (in whose name property is registered) is the lawful owner of the property with all rights, obligations, and duties towards the same. The objective of registration is to prevent fraud and dispute at the same time maintaining public records for the same. The immovable property can be registered at sub-registrar's office within whose jurisdiction the property falls.
The amount of stamp duty payable on sale deed is determined from a number of factors and is governed by State Government through Registrar Office. The stamp duty is levied on the value of property and kind of transfer of registration. Hence, extensive knowledge of different aspects involved is required in evaluating the market value of the property to purchase stamp papers accordingly. Moreover, you need experts to write and execute a sale deed. As per the current rates in Karnataka, one has to pay 5 per cent of the registered value of the property as stamp duty. In addition, a 10 per cent cess and 2 per cent surcharge on stamp duty is levied. Hence a buyer pays 5.6 per cent stamp duty in urban areas and 5.65 per cent in rural areas as the surcharge in such areas is 3 per cent. On the other hand, the registration charges are 1 per cent of the total or registered value of the property.
Please note that the amount paid for execution/stamp duty of sale agreement shall be adjusted at the time of registration of sale deed in stamp duty provided you bring the original sale agreement to the sub-registrar office (you would need to get it from your banker in case of home loan availed). This process is called DENOTE process and is not applicable in assignment / swapping cases. Before we end this article, in case you availed home loan from a bank, the original sale deed shall be submitted to the bank; hence it is advisable to take a certified copy of the sale deed for your records.