ILN: BUYING AND SELLING REAL ESTATE - AN INTERNATIONAL GUIDE

[BUYING AND SELLING REAL ESTATE IN INDIA]

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The real estate sector in India is being recognized as a developing sector that is driving the economic growth engine of the country. At present, there are various developments and elevations which are taking place in the real estate sector, on the basis of which Non-Resident Indians and Person of Indian Origin (PIO) have been permitted to own immovable property in India. On this basis, the past and future expected transformation of India, the real estate sector is being looked at as a unique market to invest for a long term with high possible rate of return. 2. LEGISLATIONS GOVERNING REAL ESTATE Despite there being plethora of laws governing the real estate sector in India, most of the enactments are quite old and major amendments to existing laws are required to make them relevant to modern day requirements and transformations in the ever-changing dynamic sector. The Central laws governing real estate include: 2.1. Transfer of Property Act, 1882 The transfer of Property Act is a central act regulating the transfer of property particularly immovable in nature and enumerates the general principles of realty, like part-performance. The Act also specifies provisions for dealing with property through sale, exchange, mortgage, lease, lien, and gift. A person acquiring immovable property or any share/interest in it is presumed to have notice of the title of any other person who was in actual possession of such property. 2.2. The Indian Contract Act, 1872 This legislation is the primary enactment governing essentials of a contract including parameters to ascertain capacity

of an individual to contract. A contract pertaining to realty can be entered into, among others, by an individual (who is not a minor or of unsound mind, as per the Indian laws), partners of a firm, a corporate legal entity, a trust, a sole corporation, the manager of an undivided family, and a foreigner, however, all the essential requirements of a valid contract, i.e., consideration, intention to contract and validity under the law of the land must be satisfied. 2.3. The Registration Act, 1908 The Act was enacted to ensure conservation of evidence, assurances, title, publication of documents and prevention of fraud. It details the formalities for registering an instrument and specifically enumerates the instruments which are mandatorily required to be registered. An unregistered document, effectuating transfer, will not affect the property comprised in it, nor such unregistered document be received as an evidence of any transaction affecting such property (except as evidence of a contract in a suit for specific performance or as evidence of part-performance under the Transfer of Property Act or as collateral), unless the document/instrument has been duly registered. 2.4. The Indian Stamp Act, 1899 The Stamp Act is a fiscal enactment on the basis of which stamp duties are levied on transactions and the instrument effectuating the transaction, and the same is directly linked to the aforementioned Registration Act. The stamp duty is required to be paid on all instruments which are registered, and the rate varies from state to state. Some states even have double stamp incidence,

ILN Real Estate Group – Buying and Selling Real Estate Series

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