Buying property or land
in India — key considerations.

Some guidelines for buying a flat or vacant land

The points below apply to almost every purchase of a flat or of vacant land in India. They are drawn from the pattern of difficulties we most often see.

• Check the builder's reputation. What other projects has this builder completed? Are there complaints, delays, or disputes? Do not rely on glossy brochures — verify the record.
• See the documentation for the land on which the flats are to be built. There should be a proper certificate issued by a lawyer of at least three years' standing. The documents ordinarily name the parties from whom the land was acquired. It is always better to have your own lawyer advise you on such matters.
• Check that the plans provided by the builder have been approved by the local government authorities. An unapproved plan is a plan that can be the subject of later enforcement action — against the builder and, in practice, against the buyer.
• Ask what happens if the project is delayed. It is not uncommon for builders to raise prices later if market prices go up. Ask the question before paying the deposit, and get the answer in writing.
• Get promises in writing. Verbal promises are effectively worthless in a dispute. Every assurance given at the sales stage should be reduced to writing and attached to the agreement.
• Confirm that you will receive the completion certificate — granted by the local authorities — before possession. This should be a written assurance, not an informal one.
• Get clarity in writing on how the builder will hand over after construction is completed. For example, whether a co-operative society or a residents' association will be formed, and on what terms. This may not seem important at the time of purchase; it very often becomes a costly matter later.

The society handover — why it matters

A dispute that recurs again and again in Indian residential buildings is who runs the building after construction. Builders are often reluctant to hand over control to an elected society. Instead, they form a management authority of their own, while the residents form a society and seek control. The two then contest the position.

The reason is not merely administrative. Where there is no society, the builder typically provides the no-objection certificate (NOC) that a subsequent sale requires. That NOC is often charged for — sometimes at a percentage of the sale price, which can amount to lakhs of rupees. A builder who retains control of the land also stands to benefit from any relaxation in building codes, which may entitle them to construct additional flats on the same land, or to add further floors, and to retain the sale proceeds.

An NRI purchasing a flat should therefore ask, at the outset, whether a society will be formed, what the timeline is, and what the builder's position is on the handover. Where the answer is unclear or informal, the risks are significant.

Payment methods — and what to avoid

In India, some builders traditionally expect a portion of the price in cash, outside the formal accounting — the so-called "black money" component. For an NRI, this is a serious problem, for three reasons:

• It is not legal. Paying amounts outside the recorded transaction exposes both the payer and the recipient to consequences under Indian law.
• It complicates repatriation. On a later sale, only the amount actually paid and recorded can ordinarily be repatriated. The unrecorded portion is effectively trapped in India.
• It weakens your position. Where a dispute arises, an unrecorded payment is difficult to prove and impossible to recover.

The correct position for an NRI is to pay only by cheque or by electronic transfer, through banking channels, from the NRI's own account. Reputable builders understand and accept this. Where a builder insists on cash, that insistence is itself a reason to look elsewhere.

Property registration in India

The registration of documents relating to immovable property in India is governed by the Registration Act, 1908. The Act was designed to ensure that information about all dealings concerning land is accurate and that proper land records are maintained. It also provides for registration of other documents, which gives those documents additional legitimacy. Registering authorities have been established in every district for this purpose.

What is compulsory and what is optional

• Compulsory registration. Registration of documents relating to immovable property is compulsory.
• Optional registration. Registration of a WILL is optional — though, as we explain in our note on preparing a WILL, it may be sensible to register in certain circumstances.

Timeline for presenting a document for registration

A document should be submitted for registration within four months from the date of execution. Where a document is executed abroad by some of the parties, it may be presented for registration within four months after its arrival in India.

The four-month period is strict. A document presented after the period may be refused registration, and the consequences of that refusal can be serious — particularly where the document is a sale deed and the buyer is dependent on the registered record to establish title.

Where the document is registered

• Correct office. A document relating to immovable property should be registered in the office of the Sub-Registrar of the sub-district in which the property is situated. Registering in the wrong office does not cure the defect.
• Personal appearance. All persons executing the document — or their representatives, assigns, or agents holding a Power of Attorney — must appear before the registering officer.
• Signature before the Registrar. All persons executing the document must sign it in the presence of the Registration Officer.
• Photograph and fingerprints. Where the document relates to the transfer of ownership of immovable property, a passport-size photograph and the fingerprints of each buyer and seller must be affixed to the document (proviso to Section 32A). The Registrar is required to ensure that these are endorsed on the document.

The registration itself

When the Registering Officer is satisfied as to the identity of the persons appearing, and when those persons admit execution of the document, and after the registration fees are paid, the Registering Officer registers the document and makes the necessary entries in the register maintained in the office.

After all formalities are complete, the Registering Officer endorses the document with the word "Registered" and signs it. The endorsement is copied into the register. The duly registered document is then returned to the person who presented it for registration.

Effect. A document takes effect from its date of execution, not from the date of registration. Where the document states that it will be effective from a particular date, it takes effect from that date. The date of registration is therefore important for the record, but it is the date of execution that governs the legal effect of the transaction.

Where the difficulty usually arises

In our experience with property purchases involving NRIs, the difficulties that most often lead to disputes are these:

• Title defects that were not checked. A sale deed that has been signed, and money that has been paid, on the strength of an incomplete or unverified title. A proper title search — through the revenue records and the sub-registrar's records — should come before any payment.
• The society handover. A flat purchased without clarity on the society, and without a written handover undertaking from the builder.
• Unapproved plans. Construction carried out on a plan that was never approved, or that was approved only in part.
• Cash payments. Amounts paid outside the recorded transaction, which then cannot be recovered or repatriated.
• Delay in presenting the document for registration. Documents signed while the NRI was in India and left for later presentation — sometimes presented after the four-month period has expired.
• Registration in the wrong office. Registration at the Sub-Registrar's office of a district other than that in which the property is situated.
• Failure to keep the documents. Registration offices in India are not fully computerised. The registered document is the buyer's primary proof of title, and the buyer should keep the original in safe custody — along with a certified copy, and a scanned copy.

How Kavao Law can assist

We advise NRIs, foreign nationals, and their families on the purchase of property in India. Our work typically includes:

• Conducting title searches at the revenue office and the sub-registrar's office, and advising on the position of the title.
• Reviewing the builder's documents, the approvals, and the completion certificate position before any deposit is paid.
• Advising on the terms of the agreement to sell and the sale deed, and on the provisions that protect the buyer.
• Advising on the society handover, the NOC regime, and the risks of a builder continuing to control the building.
• Advising on the form of payment, on compliance with FEMA, and on the repatriation position on a later sale.
• Coordinating the registration of the sale deed at the correct Sub-Registrar's office, and ensuring that the four-month timeline is met.
• Conducting physical verification of the property and reporting on the position on the ground.

For more on this service, see our Property & Land Records practice-area page and our note on searching property records in India.

A closing note

The information in this article is general in nature and is intended to give NRIs a clearer sense of the considerations that apply to buying property in India. Every purchase depends on its own facts — the nature of the property, the state in which it is situated, the position of the title, and the terms on which the seller or builder is willing to deal.

An Indian property purchase is one of the largest financial commitments an NRI is likely to make. The cost of proper due diligence — a title search, a review of the builder's documents, a site visit, and the registration — is small in comparison with the cost of a dispute. Where the property matters, seek case-specific advice before paying any amount.