It’s the gospel truth – Documentation is the soul of a transaction.
Whether you want to buy a new or resale property or sell one, you will need a checklist of essential documents to fructify the deal. For an NRI investor interested in buying or selling property in India, understanding the intricacies of property transactions in India is important, but without the correct documentation, you’d be faced with unnecessary delays in executing it.
Let’s take a look at the documents needed by buyers and sellers of property in India to ensure the transactions are carried out without a hitch.
Checklist Of Documents Needed By Buyers And Sellers of Property In India
Documents Needed To Be Produced By The Buyer:
With the introduction of RERA, there is increased emphasis on transparency and accountability in real estate transactions. Since NRIs face more regulatory barriers as compared to Indian Residents, it is important to keep this checklist handy, when buying real estate. Let’s look at the documents an NRI investor will need to purchase property in India:
An NRI will need to produce his/her passport to purchase property in India. If he/she has an Indian passport, there is no need to seek prior approval from the RBI to buy any number of commercial or residential properties. It is important to note, that NRIs are often confused with PIOs and OCIs.
A PIO (Person of Indian Origin) is an individual who:
- Holds the passport of any foreign country.
- Is a foreign citizen whose father or grandfather was a citizen of India.
An OCI (Overseas Citizen of India) is an individual who:
- Is not a citizen of India, but eligible for citizenship (dual citizenship).
Such individuals need the PIO and OCI cards respectively to purchase property in India.
However, neither of them can invest in plantations, agricultural properties or farmhouses (unless they have been inherited by or gifted to them).
2. Proof of Address:
An NRI needs to submit substantial documents in support of his address in India. The acceptable list of documents includes telephone bill, ration card, electricity bill, LIC policy, cell phone bill or any utility bill. (3)
For his/her overseas residential proof, he/she can submit the equivalent of any of these documents and some additional documents like:
- Driving license
- Identity card
- Work permit
- Social security card
- Copy of credit card
- Last 6 months bank statements of all NRE/NRO accounts in India
3. PAN Card:
PAN has been created to track and regulate taxable income in India. It is ideal for an NRI/PIO/OCI investor to have a PAN card, especially if he/she intends to let out the property later since the rental income received is taxable.
Additionally, if the NRI intends to sell the property, the capital gains arising from the sale will also be subject to taxation.
However, in the absence of PAN, the NRI/PIO/OCI can use Form 60, which is an exemption from providing the PAN.(4)
4. Loan Sanction Letter:
NRIs are also eligible for obtaining loans for financing their property purchase like an Indian Resident. Once the NRI applies for it, it is important for him/her to obtain the loan sanction letter. The letter is a proof that the applicant is eligible to avail a certain amount of loan from its lender (bank or financial institution) subject to the fulfilment of certain terms and conditions as mentioned by the lender.
The letter is issued only after the bank has evaluated the applicant’s credit history and other credentials based on the documents submitted along with the application.
The seller can demand the loan sanction letter to be sure that the buyer will be able to pay the price of the property within the stipulated period.
5. Power Of Attorney (POA) If Needed:
Most NRIs plan a visit only once all the groundwork has been completed by friends/relatives/brokers. However, in the case of properties are under construction, it might be difficult for the NRI to be present during every stage of the transaction.
In situations where the transactions could take a lot of time, the NRI can appoint a legal representative in India, and transfer rights to execute the transaction through a Power of Attorney. The representative can take decisions, to the extent mentioned in the deed, on behalf of the NRI.
To understand the intricacies of executing a POA, refer to the article here.
Documents The Seller Must Produce:
In addition to the above fundamental documents, the NRI buyer will also need certain documents to complete the paperwork required to submit to a bank or such other authority to process his/her application for loans, as well as to establish rightful ownership over the property.
The seller should provide these documents to the buyer during the course of the transaction.
If an NRI intends to sell his/her property in India, he/she should ideally have all the below mentioned documents:
1. Land Records And Mutation Extracts:
Land ownership is broadly determined by access to a land title, a document that states such ownership. Having a clear land title protects the rights of the title-holder against other claims made by anyone else to the property. In India, land ownership is determined through various records such as registered sale deeds, property tax documents, and government survey records.
The nomenclature of land records varies from state to state.
For example: In Maharashtra, it is called the 7/12 Extract. It is a document that lists the details about a specific piece of land such as survey number, area, date and more particulars about the existing owner’s name. This extract is a combination of two forms. While Form 7 talks about the details of the landowners and their rights, Form 12 lists specifics about the land type and usage. This document is maintained by the revenue department of the state for the purpose of tax collection. It is issued by the Tehsildar or the concerned land authority.
Mutation refers to a transfer or change of title entry in revenue records of the local municipal corporation containing details about the type of ownership, number of owners of the property (and their share in property), loan on the property, tenant at the property (if any), cultivable and non-cultivable areas in the property, source of irrigation (if any), assessment for the property. (1)
2. Sale Deed With Chain Of Titles (Where Applicable):
The sale deed is the most important document when buying property in India. The sale deed establishes the ownership of the title to the property.
In case of multiple previous owners, the seller should also be able to provide the chain of title – the history of transfer of title from the previous owners to the present seller and a list of all the successive owners. The sale deed has to be registered at the office of the Sub-Registrar of the area where the property is located.
3. Copy Of The Building Plan:
The buyer must acquire a copy of the building plan approved by the statutory body to establish that the construction of the property is legal and has been done in accordance with set rules and regulations.
4. No Objection Certificates (NOC):
There are as many as 19 NOCs that have to be acquired by a developer from different authorities while building a housing project. (5) However, the number may vary according to specific state rules. Generally, the copies of these are attached in the first sale-deed which is signed between the Developer and the First buyer.
An individual buying directly from the developer (primary sale) or from the current owner (secondary sale) should obtain copies of the NOCs from the respective individuals and maintain records.
5. Allotment Letter:
An allotment letter is one of the most important documents required for getting a home loan. It is issued by a developer or the housing authority, stating the description of the property and details of the amount paid by the buyer to the developer – Thus confirming the ownership of an individual on the said property.
This letter should be produced before the buyer and also be part of the new sale-deed to confirm the seller is indeed the rightful owner and thus entitled to sell the property.
6. Possession Letter:
This document is provided to by the developer to the first buyer and sets a date on which the latter would grant the former the possession of the property.
In case of a resale property, this document should be produced before the new buyer. Also, the bank or any other lending institution requires a copy of the possession letter of the existing owner to be able to process the application for a loan.
7. Property Tax Receipts:
Property owners have to pay taxes. The NRI should ensure that the previous occupier/owner had paid property taxes and there are no pending dues.
Property tax receipts also help in proving the legal status of the property.
8. Encumbrance Certificate:
An encumbrance certificate is required to prove that the property does not have any pending legal dues or mortgages. This is one of the key documents banks ask for before they grant a loan to the buyer.
This certificate also has all the details related to the transactions happened over a period of time. In India, Form 15 is issued if a property has any encumbrance registered; otherwise, Form 16 will be given to the owner, stating there are no encumbrances.
9. Completion Certificate:
Upon completion of construction, it is mandatory for the developer or the owner of a stand-alone property to get a completion certificate from the local authority. This certificate is awarded only if the authorities inspect and are satisfied that the project/building has been constructed according to the approved building plan and mandatory standards have been maintained.
This certificate is crucial to ensure the supply of basic amenities such as water, electricity and drainage system. The builder cannot give the possession to the buyer unless the completion certificate is obtained.(3)
10. Occupancy Certificate:
The Occupancy Certificate (OC) is issued at the end of the construction by a local government agency or planning authority. It indicates that the property is in a suitable condition for occupancy.
The developer is responsible for obtaining occupancy certificate and it is issued only once the building has been completed in all respects and is ready to be occupied. Any subsequent resale of the property would also have a copy of OC as part of the list of documents required to be produced by the seller.
11. Conveyance Deed:
Conveyance refers to the transfer of the title for land and building by the landowner in favour of the housing society by execution of Conveyance Deed.
Through Conveyance, it is possible for the housing society to get a legal title in its name. In the absence of conveyance:
- An individual who has purchased a flat in the building, will not have ownership of the land where the building is constructed.
- If there is any damage to the building, it cannot be reconstructed without the permission of the landowner.
- The landowner may mortgage the property since he/she is the legal owner.
- The landowner may make a profit from the sale of open spaces, gardens, terraces, parking space, etc. within the society.
12. Tax Returns:
If the NRI has been holding a property for a considerable period of time and has been earning returns from it (in the form of rental income), he/she would need to pay taxes for the same.
In such a case, records of the tax returns for the ownership period should be available.
13. Proof of Address:
For an Indian resident seller, they need to provide his/her address proof in India. In case of NRI seller, one has to provide proof of his/her address in India as well as abroad.
This can be in the form of electricity bills, life insurance policy statements, passports, etc.
14. NOC and `From The Housing Society:
For an apartment in a particular housing society, a letter from the society is needed for a go-ahead to the sales process. This document states the seller:
- Has no outstanding payments.
- Is a member of society.
- Has a share-certificate of the society, etc.
It is wise to keep this checklist handy when buying or selling property in India, to ensure that the whole process is smooth and quick.
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