Real Estate is one of the fastest growing sectors in India as it offers great investment opportunities and ensures good returns on your investment. It is very essential to buy and register immovable properties according to the governing state and central laws of India. Immovable property includes land, agricultural land, farmhouses, shops, buildings, houses, apartments, bungalows, etc. Registration of property transactions in India as per Indian Registration Act and property laws in India makes property buying and selling process a safe and secure procedure.
Why is Real Estate Registration Important in India?
Real estate registration is an essential part of the property buying process. Buying property involves a lot of steps and procedures, but registration of property is undoubtedly the most important and complex one. It ensures prevention of fraud, conservation of evidence, and assurance of title. The buyer must take special care while purchasing any immovable property and should be aware of the legal proceedings involved in property registration procedure.
If you fail in registration of property, the old owner will be considered the right and legal owner. The sale of the property won’t be considered legal until the sale deed is properly stamped and registered. The key purpose of registration of property is to maintain the ownership of the property.
‘Transferor’ is the one who is selling the property and ‘transferee’ is the one buying it. The purchaser of the property will pay the stamp duty and registration charges.
If the property is not registered in your name, you will not have any rights in case of a dispute.
The key steps involved in the property registration procedure in India are
- Verification of the title of the property.
- Evaluation of the property value.
- Preparation of the stamp papers.
- Getting the sale deed ready.
- Payment of the stamp duty and registration fee.
- Approach the sub-registrar for Registration.
- Document submission.
- Completion of Registration.
Stamp duty is a type of taxes levied by the government under its jurisdiction for a transaction of property by which people extinguish any right or liability. In real estate, stamp duty holds a key part of costs involved in property registration and it varies in different states. Usually, it is some percent of the total transaction value and depends completely on the ready reckoner rates decided by the state government.
Stamp duty is governed by the Indian Stamp Act and the Registration Act. In urban areas, usually, the stamp duty charges are higher. The stamp duty rate varies from 4 percent to 10 percent in different Indian states. To encourage property rights among women, many states in India charge lower stamp duty if the property owner is a woman.
Stamp duty is a one-time charge paid under Section 3 of the Indian Stamp Duty Act, 1899. Failing to pay this charge will make you pay a penalty of 2 percent of the outstanding amount every month.
Registration of Property Documents
Next step is to register the document under the Indian Registration Act. This is done under the authority of the
Sub-Registrar under whose local jurisdiction the property is located.
The main aim behind the registration of documents is to record the execution of the document. If the necessary documents are not registered in the buyer’s name in the government records, the buyer is not considered as the official house owner. Registrar office keeps the registration original copies which can be referred to in case of a dispute. That’s why the sale deed should be duly stamped and registered by paying necessary stamp duty and registration fee to the concerned authority. Also, it is important to register the property documents within 4 months from the date of execution. In case of a delay, you can ask the district registrar extension of another four months for registration. However, there is a certain amount of penalty charged.
In special cases, if a party to the transaction cannot personally visit the sub-registrar’s office, a request can be made to the sub-registrar to appoint any of its officers to accept the necessary documents for registration at the residence of such person itself.
Important documents required for buying a property in India
- Permanent Account Number (PAN).
- Passport Size Photos.
- Passport (if the buyer is NRI).
- OCI/PIO Card (in case of OCI/PIO).
- Proof of residence.
- Copy of the Municipal tax bill.
Important documents for registration process of property in India
- Ownership documents i.e. power of attorney, land purchase deed, conveyance deed, sale agreement, title deed in original along with its 2 photocopies.
- Buyer & Seller ID proof and 2 witnesses.
- Payment proof and details.
- Khata Certificate and tax paid receipts.
- Encumbrance certificate.
- Payment receipt of stamp duty and registration fees.
According to Section 17 of the Indian Registration Act, 1908 it is mandatory to register the documents, related to the transfer, sale or lease of a property. There must be two witnesses present during the registration process and payment of registration fees.
The registration fee is usually 1% of the agreement value or INR 30,000— whichever is less. Earlier the documents submitted during the registration were returned after 6 months. But with the digitalization, the documents are now returned within half an hour to the buyer.
A person is eligible for a deduction of stamp duty, registration fee and other important expenses involved in the home buying process. This deduction (maximum limit of deduction under Section 80C is INR 1 Lakh every financial year) is from gross total income.