We were busy during the first half of this year in two real estate transactions - the sale of our apartment and then the purchase of an independent house. After that, we got a number of queries from our friends on the procedures; so, I thought of documenting the experience.
I'll skip all the steps involved until the buyers and sellers have met and agreed on the transaction. Let's focus on the procedures alone.
The seller will have to give the buyer copies of the following documents.
- The sale deed that is the proof of your purchase
- Encumbrance Certificate for at least about 30 years.
- Parent Documents - Documents that trace the ownership of the property / its parts for the past 30 years. In addition to sale deed, it might include release documents (that someone has given up ownership), settlement (someone was awarded), legal heir and death certificates (if any of the earlier sellers had inherited the property), power of attorney (that the person who signed the sale deed was authorized to do so by the rightful owner)
- Latest receipt of property tax paid
A quick digression on what this encumbrance certificate is and how to get it. This certificate is issued by the corporation or other applicable authority that states the transactions about the property for a given time period. Any sale, release or other activity on the given property is recorded and the certificate refers to those transactions. You may get a single certificate of a long period or choose to get the certificate for a smaller duration, typically since the time the seller bought the property.
The buyer will take these, may hire a lawyer to review the documents for completeness. Usually, the buyer would need up to a couple of months to complete the sale process. He may use the time to arrange for funds through loans. Once the buyer finds the ownership and the supporting documents clean, you will go for a sale agreement.
A sale agreement is made to state that the buyers and sellers have agreed on the sale price, payment terms and an approximate duration within which the sale could be completed. Once the sale agreement is made, the buyer can take it along with the documents mentioned above to his financing institution for a housing loan.
The housing loan institution might have authorized a loan amount to the buyer (based on his income, profession etc) earlier. The authorization doesn't guarantee a loan for the specified property. After submitting the documents mentioned above, the housing finance company would scrutinize them and approve a loan for the buyer and for the requested property. This takes anything between 2-4 weeks depending upon the property type, its sale history and availability of supporting documents. The financial institution will ask for the originals of all the submitted copies for verification.
Once the loan is approved, a draft of the sale deed may be prepared and reviewed by both the parties for correctness and completeness. This draft sale deed must be submitted to the financial institution. The seller's bank information may have to be passed onto the housing finance company along with the payment amount and mode details. This will also be stated in the sale deed. Then the buyers, sellers and the financial institution (if any) agree on the date of registration.
To register, the buyer pays for the stamp and the registration charges. After Telgi and all, the stamp paper's denomination is usually a small percentage of the actual stamp duty. The remaining amount is paid as a demand draft along with the registration charges as two separate DDs. The registration charge is a percentage of the transaction amount. It has been a known practice that the transaction amount is under quoted to cheat on the registration charges. Take my recommendation - do not attempt it for it is cheating and you will have more trouble explaining it to IT department.
On the date of registration, the seller must be ready with all the original documents. Photographs, proof of identities and copies of PAN cards of the buyers and sellers must be submitted at the registrar's office. The financial institution will send its person with the checks. The registrar will verify the property details and approve a registration. This will be followed by signing the sale deed and placing the thumb impression. The document will be entered into the government records after a survey of the property and scanning of the sale deed. This takes about 2 weeks. But at the time of registration, a slip would be given with the details of the document registration (serial number). Usually, the person from the financial institution will take it and collect the originals when they are ready.
The buyer can collect the copies of the documents from the financial institution. The seller may also need the copies as sometime the bank may ask for it before accepting high value deposits.
Now the sale is over. The next steps are, changing the owner names in property tax, water and electricity departments. The sequence is as follows:
1. Property Tax: Take copies of all the documents mentioned above and attested copies of the sale deed, fill-up couple of forms in the Corporation office (or whatever authority the property comes under). The name transfer will be effective in about 2-3 weeks.
2. Water Tax: Take the copies of the sale deed, changed ownership information in the property tax (as a receipt for the recent period), fill up forms etc. This takes up to a week.
3. Electricity: Take the copies of the sale deed, changed ownership information in the property tax (as a receipt for the recent period), fill up forms etc. One of the forms needs signatures from the previous owners. So, do not tick off the seller until you get signature in this form. If the sellers have inherited the property, you will have to attach the supporting documents of legal heir etc. This takes couple of weeks to complete.
We did all this, starting last December. The legal due-diligence of the property that we bought took a good 4 months as it had all kinds of history. We had to beg at the financial institution for a lower rate as the time they had given at the time of authorization had elapsed by the time we went for registration.
The post-sale formalities went on for another 4 months and included a step of getting an updated patta. Patta is the official land record that states the property details and its ownership. Now we got all the documentation done.
The next step is apply for demolition and reconstruction. The story continues for us....