Purchasing Property in India

Check documents! . . .

What you should know before

buying a home or land in India

More and more non-resident Indians, now holding foreign passports, are purchasing property in India. While every non-resident would have their own reasons of purchasing property in India, some of the common reasons are: 1. Their desire to return to India sometime in the future. 2. For investment purposes. 3. To have a place in India when visiting. While purchasing property in India is a wise decision, the last thing non-residents want on their hands is a legal dispute involving property in India. Courts in India are pretty slow and cases can drag on for tens of years. Non-residents who purchase property in India, should be extra careful when signing contracts and giving deposits. Seek the help of a lawyer to verify documentation.

Buying land in India

When buying land, take every step possible to ascertain ownership of the land. This is no easy task for non-residents. The problem with land purchases in India is, the verification of ownership of the property being purchased. While India is gradually moving in the direction of computerizing property records, this facility is not widely available yet. Most records need to be verified manually and such searches are often time consuming. NRIs should always seek the help of a lawyer, when purchasing land in India. When purchasing land, here are some of the things that non- resident property purchasers should consider: 1. Ownership record check 2. Getting an 'Encumbrance Certificate’ 3. Getting a 'Release Certificate’

Land ownership record check

Only the rightful owner has the right to sell their property, ensuring that you are dealing with the legal owner, is the number one factor when buying property. Get a check done of the ownership records of the property for at least, the past 30 years. This should show you the list of all transactions associated with the property, during this period. Don't simply accept the documents given to you by the seller on face value. Have your own search and verification done at the appropriate registration office.

Encumbrance Certificate

The current owner may have pledged the property to a bank to get a loan. The purpose of an encumbrance certificate is to find out whether the property being purchased has a mortgage/charge on it. The encumbrance certificate will show all the transactions registered, relating to a particular property for a specified period. Depending on which state in India you are purchasing property, you may also hear of 'Non- Encumbrance certificate' or 'Nil-Encumbrance certificate'. The purpose of these documents is normally the same.

How to obtain encumbrance

certificate

Encumbrance certificates, are obtained from the sub-registrar's office, where the deed for the land has been registered. The procedure involves: 1. Submitting application to get encumbrance certificate to the sub-registrar's office, under whose jurisdiction the property is located. 2. Providing details of the property, such as correct survey number etc. for which the certificate is required. You should get this information form the seller. 3. Providing proof of residence. 4. The appropriate fee. This is based on the number of years you wish to get the certificate for. Request for at least 30 years is recommended. The certificate is issued by the Sub-Registrar and should help you find information about the property such as: 1. Documents registered in respect of the property. 2. The parties to the property deed. 3. Nature of charges created if any, amounts secured or transacted in respect of the property. 4. Title information, registered details and document identifying numbers etc. While encumbrance certificate is an important document when purchasing property in India, there are some limitations, on the information that these certificates provide. NRIs should not solely rely on information provided on an encumbrance certificate.

Limitations of Encumbrance

Certificates

These certificates are issued for a specific period of time, and fee is charged accordingly. It does not cover any period prior to or following the period mentioned. Any encumbrance, prior or later than the dates for which the certificate is issued, would not be known. This is the reason; information should be request for a longer period of time. Generally, the encumbrance certificate issued by the sub-registrar is based exclusively on the documents registered with the registrar's office. Any document that has not been registered will not be mentioned on the certificate you receive. In case you are wondering what type of documents may not be registered with the registrar, regarding a property? Here is an example: 1. Suppose the property is leased, any lease that is for a period of less than one year, does not have to be registered with the registrar. 2. Testamentary documents are not required to be registered. 3. In a case where a lender may loan money, after taking custody of the original documents of the property. The lender may not register the loan, thinking that the property cannot be sold, as long as they have the original documents.

Release Certificate for a property

In the event a property was pledged by the seller in the past, even though the loans have been repaid, ask the seller to provide you with a release certificate. This would be a document issued by the bank that provided the loan, confirming that all loan payments have been made and there are no outstanding dues associated with the property.