Owing a home is every India’s dream – a dream that transcends all geographic, demographic and cultural barriers. For many, it is their life’s largest and most significant investment. In most cases involving end users, the registration of a property happens naturally as it is an integral part of the purchase process. Because of this, the incidence of such purchasers failing to register their homes is extremely small.
The incidence of failure to register properties is much higher among professional real estate investors, who often buy properties in bulk directly from the developer. Many such investors are unwilling to pay for the registration of such properties. The reasoning is that they will in any case be resold, and that the purchaser will undergo the registration process at that time.
No matter how prevalent this practice is, there is a high legal risk involved. Without registration of a purchased property, the legal rights over it continue to be vested fully with the developer. Needless to say, this is a game with extremely high stakes involved – and therefore a gamble at best.
The Indian real estate market is still at a basic stage of evolution, and the temptation to bypass the law on property transactions continues to be a factor. Thankfully, property laws as well as their enactment are now catching up with the realities of the present day.
WHAT THE LAW SAYS
Registering the documents relating to the transfer, sale, lease or any other form of disposal of a property is compulsory by law under section 17 of the Indian Registration Act, 1908. The registration of an agreement to buy or sell a flat in Maharashtra is compulsory under Section 4 of the Maharashtra Ownership Flats Act, 1963.
Once a property is registered, it means that the person in whose favour the property is registered is the lawful owner of the premises and is fully responsible for it in all respects.
If the required documents are not duly registered, then Section 49 of the Indian Registration Act, 1908 states that the documents will not have any bearing on the property, and that they do not confer any transaction rights over the property. In other words, the law does not recognize unregistered owner and does not give him any rights over the property.
PROCESS OF PROPERTY REGISTRATION
The registration of a property involves adequate stamping and paying the registration charges for a sales deed and having it legally recorded at the sub-registrar’s office.
If the property is purchased from a developer, registering the property amounts of an act of legal conveyance. If it is the second or third transaction for the property, it could involve a duly stamped and registered transfer deed. The process is now computerized in most states, and involves the issuing of a token number for registering the document on a specified date. The process can take anything from seven to fifteen days.
The documentation will vary depending on whether the property is being transferred from the developer or if it is a secondary sale. If the property is already under lien, then the mortgaging agency will have its own format.
There are various costs involved, and these vary from state to state. Currently in Mumbai, the costs can amount to 5% of the total registered value of the property, but this depends on exact location. According to states, it can vary from 3-8%, again depending on exact location and registrar jurisdiction. It is very advisable to anticipate and factor the cost of legal registration of the purchased property into one’s overall budget. The exact figure involved can be worked out with the developer or real estate agent and finances accordingly planned.
REGISTERING A MORTGAGED PROPERTY
If a property that is under mortgage is to be registered, the mortgaging bank will require an NOC from the housing society in a prescribed format. It would then initiate the loan disbursement, depending on the repayment eligibility of the purchaser. The document will be duly registered on bank’s confirmation of disbursement to the seller after obtaining all the originals from the sub-registrar’s office. The housing society will need to receive an intimation, without which the existing owner cannot create any third-party lien or exercise any right to further sell or grant a leave and license on the property.