Buying property in India - The common man's guide - Part 1

Buying property in India is a very complex affair. (Where in the world is it easy anyway you ask!) The reason why I say that is because the fundamental premise the property industry in India operates would be to withhold information about the buying process so that the buyer has to be content with what he or she thinks is right or takes the best smooth talker from the property vendor as the right thing to do. I had recently got myself involved in buying some property in the boonies so I wanted to share the experience and at the same time try to elaborate the property buying process in India.

So let me start off with the process - The plots are typically part of a large acreage of property that is owned by one or more vendors. These plots are sold by an organization that is called as the VENDOR and the buyer of the plots is called as the PURCHASER which would be us. The VENDOR in many cases will not own the property themselves but they will be representing the owner of the property who would be the actual seller. The vendor to represent the seller will have a power of attorney from the seller.

The first step in the game is to check out whether the property is legally OK for purchase. I would advise that you should do this step even before you start discussing the price of the lot that you want to buy. The legal check is the non-negotiable part of the deal - If the lawyer says no, I suggest you walk away.

You will have to pay a small advance to get a copy of the original paperwork for the property. If you have a good VENDOR he will give you an entire file of documents that will look positively daunting. At this point in time you need a competent lawyer who can check the paperwork for the following key items (and a lot of other things)

1. The seller has complete current ownership of the property : If the property is under lein or there are multiple owners then necessary steps have to be taken by the seller to sell the property (get all the owners to sign, close the lein etc.., ) . This is typically found through what is called as an encumberance certificate (EC). Thus most lawyers will demand for an up to date original EC. This can be easily obtained from the local body which handles registration of property (Sub registrar office typically). In Chennai and suburbs, you can actually apply it on the web and have it delivered at home - how is that for convenience? The website is http://www.tnreginet.net


2. How did the seller obtain ownership of the property : If the seller bought the property himself then this is the easy part - they have every right to sell it off. Otherwise check if the property that is being sold is not inherited (gifted property)


3. Patta, Chitta and Adangal documents : This is the part where I am also a bit hazy. The patta is the official definition of the property that is being sold (dimensions etc..,) and also says which government survey number that the property is part of. If anybody has more details on this, please let me know.
   
4. Plot have been defined according to the rules :Check whether the defined plots on the lot has been done according to the town planning rules that is prevalent in that location - for example have the roads been gifted through a gift deed to the local town planning body say the panchayat so they are responsible for owning & maintaining the roads.
   
5. The VENDOR has sufficient authority to sell the property: Verify if the power of attorney (POA) granted to the VENDOR by the seller is current and rightfully states that the VENDOR has sufficient rights to represent the seller.


6. Originals verification : This is one step that you should insist your lawyer do even if he does not show keen interest for the same :). He should verify the paperwork that he has reviewed has an equivalent original document either with the seller or in case of registered documents with the registrar. This will ensure that the copy of documents documents that you have verified have not been "altered" during the copy process.
   

This is by no means an exhaustive checklist but these are critical things that needs to be looked at for sure. Your lawyer is your friend during this part of the transaction. Since he represents you, he has your best interests in mind. You should definitely find an independent lawyer if you don't have your own already. During this process you will be involved in a lot of back and forth discussion with the VENDOR or seller and what the lawyer wants. If you have a vendor/seller who is not ready to cooperate with the necessary paperwork, it should ring some danger signals to you.

If your lawyer is happy with the paperwork that he has seen, he will give you a report saying that this property is good to be bought. Sometimes they would give a report that says the property is OK to buy subject to certain conditions being satisfied. You should followup with the seller or the VENDOR to ensure that these preconditions are satisfied.

Congrats - if you have reached this point, the property is good enough to buy. You should start negotiating the price on the vendor and start on drawing up the sale deed and sale agreement if needed. In the next article, I will touch upon what are the steps that you need to take with you lawyer if you are planning to finance on your own vs. Your are financing through a financial institution. The rules are slightly different. On the whole, you have crossed the big legal hurdle if you have reached this point.