NRI Real Estate and Property Investment in India
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Laws for Land and Disputed Properties

The real estate market in India has matured of late, with a number of professionally managed established real estate developers working on large residential townships, condominiums, and commercial properties. However, the opportunity is also being used by fly-by-night operators to make a quick buck by some unscrupulous elements.

Home buyers and investors are wary of unprincipled and dishonest operators in the business, and NRIs even more so, who have been victims of fraud and deceit in property matters for obvious reasons.

Cases of deceit and trickery in getting sale deeds of the same piece of land registered twice and thrice abound, thanks to the nexus between revenue officials, the police, property dealers and their lawyers.

State Governments and state judiciaries have made efforts to take up cases of NRIs in the fast Track Courts, as in Punjab, where property cases filed by overseas Indians are among the highest in the country. Land grabbing by impersonation, fake deals, building scams is what an NRI investor needs to be aware of before he signs on the dotted line.

In case of delayed possession of property, an errant builder often gets away lightly in spite of persistent follow-up. He ends up paying only a 10 to 12% penalty on the amount he has received from the investor, which he makes up in any case, citing inflationary costs of construction as the main reason.

Property builders have tried to woo NRIs with false claims of projects, backed by fake videos and information. The National Real Estate Development Council (NAREDCO) has proposed legislation on Real Estate Management. This would bring about transparency and ethical practices in the Indian real estate sector

A few precautions any NRI investor or home buyer should exercise are suggested here:

The real estate developer's track record
Track record of the developer refers to the maturity of the developer in terms of delivery of projects in the past. Track record of the developer is basically a function of various factors including:

  • Projects that the developer has completed in the past.
  • Whether these projects have been delivered as per agreed time schedule.
  • Whether transfer of title in these projects have been smooth.
  • Type of customer service that the developer has provided.
  • Litigation history if any.
  • Quality orientation of the developer

Insist on Original Documents
The clear title of the seller is the most important element in the purchase of a property. This ensures that the seller owns the property and has the right to sell it. It also certifies that it is not mortgaged or charged and is thus unencumbered. The title can be proven at the office of public records. Details of the sale deed are maintained by the office of the sub-registrar in every district and the revenue department maintains revenue records. Obtain a certified copy of the above deed.

If the land falls under a village survey, the important documents are: Forms 7/12, 2 and 6, which prove the possession and certify whether the land is agricultural or non- agricultural. Permission needs to be taken by the builder from the revenue authorities to convert the land for non-agricultural use and an NOC also needs to be obtained. NRIs are not permitted by law to acquire agricultural property, plantation property and farmhouses in the country, so do not allow any promoter to dupe you.

If the property falls under a city survey, a property card is available which authenticates ownership. The municipal tax assessment is also testimony to the ownership. Certification of these documents ensures a clear title of the seller.

Whether an investor goes in for finance or not, it is prudent to ask for examination of the loan papers. These papers would have complete details of ownership, plans, sale deeds, etc. The investor can go by the legitimacy of these documents because they would all have been scrutinized by a bank or a financial institution.

Some builders appoint a solicitor to determine the title deeds of the property. The solicitor goes through the property records of the last 30 years and issues a certificate of title to the builder. A genuine builder would offer the certificate free of cost to the buyer.

Some real estate developers promise not to construct on land they have not acquired, or not received permission for. But most often, they do not stop short of booking and collecting cash, and closing shop soon after.
Verify the ownership from the respective Development Authority or Municipal Council of the city in which your property is to be registered. Try and contact the original allottee of the property and trace the line of owners yourself.

In case of a power of attorney, read clauses carefully to check if the attorney holder has the authority to sell it.In addition, doubt if considerations only involve cash documents, are on plain paper, any original documents are missing or documents are only notarized.

Check Approved Plan of Property to be Purchased
The investor needs to check into not just the layout of the residential apartment or commercial space he intends to buy, but also the layout of the common space available to other members of the township, condominium or commercial space he is going to be a part of. The cost of the unit the investor is paying for includes the cost of these common spaces.

The purchaser should insist on an agreement for sale in under-construction schemes, and demand a sale deed on completion of the unit. The sale deed ensures final transfer of the property in the name of the buyer and his name appears in the public records.

Stamp Duty and Registration
One needs to be careful here. Sometimes, the stamp duty is not payable and the registration not asked for. In such cases, a declaration should be taken from the builder that these are not applicable.

In the case of cooperative societies which are promoted by builders, a share certificate is in order, along with an allotment letter. It is essential to check on the owner of the land once the building is completed.

Investors should stay clear of the arbitration clause sometimes added on to the agreement by the builder. Buyers should not agree to the arbitration clause as other conditions relating to arbitration such as place or arbitrators are not negotiated when the contract is signed. In an extreme case, insist on a sole arbitrator acceptable to both.

Building Use Permission (BUP)
Building use permission is granted by the competent civic authorities to the builder. Only when the BUP has been granted can the builder hand over the house for possession.
Developers need to conform to various regulations for smooth development. Basic requirements like sanction plans, commencement certificate, environment clearance, approval and other major clearances that may be required in course of the development include:

  • No Objection Certificate (NOC) from Department of Fire Services
  • Power Load Sanction from the local Electricity Board / Distributor
  • Approval for drainage and sewerage connections
  • Approval for water supply
  • Approval from Pollution Control Board
  • Approval from Department of Public Health

Confirm that your property/ apartment/office space conforms to all construction laws and bye-laws. Very often the builder gets the building use permission in spite of the construction having violated quality and space rules. The space meant for a parking lot could have been used for some other unauthorized purpose.

Delivery, Maintenance and Associated charges:
Another key area is maintenance of facilities. Developers often charge separately for creating a maintenance purpose as well as for regular maintenance after the possession. The fees to be charged for regular maintenance need to be indicated in the agreement with the customers during purchase of property.

Completion Certificate
The investor must exercise his right to the detailed drawings/plans covering structural details, plumbing, electrical fittings, drainage and water supply. This will help maintain the building in the future. The completion certificate of the project can be obtained from the architect.

This certificate confirms the builder's adherence to the norms laid down by the civic authorities to the approved plan, and protects you from chances of litigation with the local authority. Inquire thoroughly if the property has been mortgaged or attached in any court case and, more importantly, check on encroachments on the property you are buying.

It is worthwhile to go in for insurance of the residential or commercial property you have acquired. The builder should have initially insured the flat /office, and the purchaser can take over after possession is obtained.

Check for variations in signatures repeated on documents
The vendor and witnesses signing the papers in your presence Fingerprints should be preferred over signatures, being more fool proof.

An awareness of real estate practices and keeping these precautions in mind would help keep malpractices and disputes at bay.

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