Congrats on deciding that you would now like to buy a resale property. We saw in a previous blog, as to how buying a resale home in Pune is a great idea. Obvious advantages like GST, more certainty etc. are also there. Now, let us look at the few things you need to take care of when going through the process of buying the resale property (we touched upon this briefly in our last blog) :

1. Property Verification

   Property verification is simple as a concept but is a fairly detailed process. As the buyer, you would want to know if the seller has a clear marketable title to the property i.e. is he free to sell it, or are there any other parties that can lay claim to the property. A detailed verification of all details (title search, permissions, family tree, encumbrances etc.) is necessary to establish that it is indeed safe to buy the property. You can read about this in detail in our blog; Buying property in Pune? Here’s what you need to do before you buy!

2. Sale Agreement

   First – let us not confuse the sale deed and the sale agreement. In Pune, there is a tendency to confuse the two and at times to assume that any one is sufficient. So, to clarify, a sale agreement sets the guidelines for the property to be sold. It is a document where the buyer and the seller agree to transact on the property and where details like price, inclusions, exclusions are all covered. 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.

   The sale deed is the document that is registered when the property actually changes hands! It indicates that you as the buyer, have now bought the property from the seller after paying him the entire consideration. The sale deed is executed based on terms covered under sale agreement and is legally binding.

   Since even sale deed is executed based on terms & conditions agreed upon in the sale agreement, it is important to have an expertly drafted and thoroughly vetted sale agreement. The sale agreement is also used for securing a home loan from banks. Please note that some banks insist on a registered sale agreement for processing the loan. In Pune, when a sale agreement is registered, one needs to pay the stamp duties (there is no need to pay the duties again when registering sale deed). We will discuss this part in detail on a later date.

3. 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 ready reckoner rate (RR rate) going for an area which typically would be less than the market rate. RR rate is the minimum 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;  this would matter for loan eligibility as well.

4. TDS Obligation

   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. 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.

   Download the e-tutorial on TDS payment here and list of authorized banks for depositing the TDS is available here.

5. 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.

6. 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 Maharashtra, one has to pay 5 per cent of the registered value of the property as stamp duty, 1% of the registered property value as Local Body Tax (LBT) where applicable and 1% of registered value or Rs. 30,000/- (whichever is lower) as registration fee.