NRI Real Estate and Property Investment in India
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NRI FAQs - Buying a house in India

1. What is meant by leasehold and freehold properties?
Leasehold Property is property leased to a lessee for a stipulated period. The Lessee pays lease premium and annual lease amount as fixed by the Lessor. The land ownership rights remain with the Lessor and a prior sale-permission is normally required if you plan to transfer the property.

The owner of Freehold Property has good title over the property and he can sell the property to anyone at any time. Record of ownership of the freehold property can be ascertained from the office of the sub-registrar. It can be transferred by registration of the sale deed.

2. What are the benefits of getting a leasehold property converted to a freehold property?
a) The person can become a full- fledged owner by getting the sale deed of the property after getting it registered.
b) The property would have better market value
c) The property can be sold, mortgaged or kept as an asset for security in future.

3. How to verify the authenticity of the various documents submitted by the seller of the house, particularly with regard to the possibility that the house has not been sold earlier to a third party ?
Regarding authenticity of documents, you have to take the help of an advocate to verify.

4. A flat in a Co-op Housing Society is to be gifted. What are the legal formalities? What about stamp duty?
Gift of an immovable property is considered as a 'transfer' under the provisions of the TOP Act and you have to have the transaction registered through a Gift Deed and pay stamp duty as per provisions of the relevant stamp act depending in which state the property is located.

5. What is Stamp Duty? What are the benefits of paying Stamp Duty?
Stamp Duty is a tax, similar to sales tax and income tax collected by the government, and must be paid in full and on time. A stamp duty paid instrument/document is considered a proper and legal instrument/document. It gets evidentiary value and is admitted.

6. Who is liable to pay Stamp Duty-the buyer or the seller?
The liability of paying stamp duty is that of the buyer unless there is an agreement to the contrary.

7. In whose name are the stamps required to be purchased?
The stamps are required to be purchased in the name of any one of the executors to the Instrument

8. What is meant by the market value of the property and is Stamp Duty payable on the market value of the property or on consideration as stated in the agreement?
Market value means the price at which a property could be bought in the open market on the date of execution of such an instrument. The Stamp Duty is payable on the agreement value of the property or the market value, which ever is higher.

9. Which are the instruments that attract the payment of Stamp Duty?
The instruments like Agreement to Sell, Conveyance Deed, Exchange of property, Gift Deed, Partition Deed, Power of Attorney, settlement and Deed and Transfer of lease attract Stamp Duty on market value of the property.

10. Who is the appropriate authority for knowing the market value of the property?
The Sub-Registrar of the area, in whose jurisdiction the property is located, is the appropriate authority for knowing the market value of the property.

11. What are the risks associated in buying a flat on Power Of Attorney (POA) basis?
Purchasing a flat on a POA basis is not permitted under the law of the land.

12. Is a POA revocable?
Yes, a POA can be either revocable or irrevocable, depending on what sort of a POA one has made.

13. Why is registration necessary?
Registration acts as a proof that a transaction has taken place. The registration of a document serves as a notice of the transaction to the persons affected by the transaction. It also serves as an implied notice to any person subsequently acquiring interest in the property, covered by the registered document.

When a document, which is to be compulsorily registered, is not registered, it fails to confer any title given by the document. The real purpose of registration is to ensure that every person dealing with property, for which compulsory registration is required, can confidently rely on the statement contained in the register as being a full and complete account of all transactions by which the title may be affected.

14. What constitutes completion of the sale?
The transfer of a flat is completed when you have a sale deed/ agreement for sale coupled with actual custody. Generally, in all cases the entire amount is paid simultaneously with the handing over of physical ownership and signing of the transfer documents.

15. Is it worth investing in property in India? What are the returns?
It is always worth investing in property in India, as this investment produces assets
which give capital appreciation of 20-40% each year and a net yield after tax of 10-15% per annum.

In comparison to other opportunities for investment in stock markets, bond markets, bank/saving deposits/instruments, gold and precious metals, real estate investments provide:

a) Highest returns
b) Low volatility
c) Lower liquidity and
d) Lowest risk.

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16. Which properties are worth investing in?
Investments can be made in land and built-up residential, commercial (office /IT parks) and retail properties for shopping malls and markets.

17. How can I do it?
You need information on opportunities for real estate investments either through direct or indirect sources. These provide information on investment opportunities including invitations for investment opportunities from real estate developers on their properties, brokers or real estate agents in India as well as through a real estate portal.

18. It is a general feeling that people involved in property dealing are unscrupulous. How can safety be ensured?
The real estate marketing India has matured, and definitely more professional than it was a few years ago. There are many established real estate developers operating across the country not only in 6 mega cities, 29 metro cities but also in many tier 2 cities. Do some research on them before you finalise your purchase. Good market information on standing and credibility of builders and developers would be a useful tool. In addition, the rating of developers and projects done by CRISIL and ICRA can also be used as guides.

Recently, in many cases, the complaints against unscrupulous builders for non-professional approach to product delivery and services and cost issues have been considered by consumer courts both at the state and national levels. This has helped in strengthening the healthy growth of the real estate segment.

19. I would like to invest for 7 years.
There are three categories of investments - short, medium and long term.
You appear to be a medium-term investor and seven-year time period is a reasonably good term for property values to more than double in value. This can be seen of any property appreciation in the last decade in many cities and also cutting across low, middle and higher income housing and other commercial properties.

20. What type of property would appreciate more - residential plots, or flats?
This depends. The appreciation in plots cannot be expected to be at the same rate at which built properties appreciate. Unless purchase of the plots is in an environment where the construction boom on the plots in the vicinity is also taking place at a faster pace. If you have long-term investment plans investment in plots will always fetch you positive results. However, for short and medium term investments, residential (individual housing or flats) is bound to fetch yields of about 20% annually

21. Which documents are to be verified before purchase of a flat?
Before you purchase a flat, you have to have a title and document search conducted by a competent advocate. You cannot do it yourself. You have to use the services of a competent advocate. It is a professional job to be done with professional assistance.

22. What is the difference between built-up area, super built-up area, and carpet area?
Carpet Area: This is the area of the apartment/building which does not include the area of the walls.
Built up Area: This includes the area of the walls also.
Super Built up Area: This includes the built up area along with the area under common spaces such as the lobby, lifts, stairs, etc. This term is therefore only applicable in the case of multi-dwelling units.

23. What are all the important documents one should check before buying any property?
If you want to purchase a property, you have to look at the approved layout plan, approved building plan, ownership documents, carryout search, etc. Contact an advocate before you purchase a property so that he can advise you.

24. Upon buying a flat from a builder in a building under construction, what are the permissions and papers that one should check with the builder, so as to ascertain the authenticity of the builder?

When you are buying a flat from a builder in a building under construction, you have to check the following:

a) Approved plan of the building along with the number of floors.
b) Ensure that the floor that you are buying is approved.
c) Check if the land on which the builder is building is his or he has undertaken an agreement with a landlord. If so, check the title of the land ownership with the help of an advocate.
d) Check the building byelaws as applicable in that area and ensure that the builder is building without any violation of front setback, side setbacks, height, etc.
e) Check specifications given in the agreement to sell of the sale brochure. Is he providing the same actually on the ground or not?
f) Check the reputation of the builder.
g) Ensure that urban land ceiling NOC (if applicable) has been obtained or not.
h) NOC from water and electricity authorities also have to be obtained.
i) NOC from lift authorities.

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