Ajay Kumar, 29, and Neha Arora, 25, Chandigarh-based IT professionals had been looking for buy a new two bed-room ready-to-move- in house. They can either purchase from the primary market such as developers and housing development boards or from the resale or secondary market. After several rounds of search, they were able to locate a house that suited their requirements. However, there could be minor tweaked in the process depending upon where one has bought the property. Yet, in the present scenario, if you want to buy a ready-move-in house, it does make sense to take a look at secondary market.  Even though the process is fairly straight forward, getting it right can be a hard task, not the least because of the arduous journey of purchasing a house starts from negotiation and ends with huge amount of paper work involved.

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Optimum Negotiation

While negotiating, one must insist on checking the paperwork even before committing to make the purchase.  Do not show your eagerness to buy a house, even if it matches all your priorities. Keeping in mind all the details of property and expected renovation cost, ask for a price that is 10 percent lower than what is quoted by your valuer. Do not increase the price you have quoted, let the seller drop down his price. Along with the price negotiation, discuss the terms and conditions, such as payment schedule, transfer of property papers and others. You should also find out who will bear the costs of remaining dues such as utility bills, taxes and cost of procurement of papers from the concerned departments.

Draft a sale deed

Before going for drafting a sale deed, ensure that you have collected all the necessary documents related to property, such as the original title, agreement of sale, no-objection certificate, occupation certificate and the possession letter. Carefully check the name of seller. In case the person from whom you are buying the property is mentioned as a buyer in the registry papers, then you would know that he has bought it from another person. This way you can locate the entire chain of people who owned the property.

As soon as you get all these documents, draft a sale deed. It should have the details of the property such as its location, house number, if any, the area covered, date of construction, and so on. It should also carry details of the seller and the buyer, such as their names and addresses, date of birth, father’s name, among others. The value at which the property is being sold by the seller should also be clearly mentioned.

Calculation of Stamp Duty

After drafting the sale deed, calculate how much stamp duty you would need to pay for the registration of the documents. The stamp duty and registration fee are levied on the circle rate or the purchase price of the property, whichever is higher.

Suppose the couple as mentioned above, buy a property valuing at Rs50 lakh (Rs30 lakh through cheque and draft and the remaining Rs20 lakh in cash). In the agreement, they disclose the property value to be Rs30 lakh. But say, according to the circle rate, the value of the property is Rs35 lakh . The stamp duty and registration fees in this case would be calculated on Rs35 lakh and not on the disclosed value of Rs30 lakh. For that, you would need to pay the stamp duty that varies from 3 percent to 11 percent of property value according to the prevalent rate of respective State in which the property is situated. Remember, if adequate stamp duty is not paid on the documents that have to be mandatorily registered, it would attract a penalty, which could go up to 10 times the value of the stamp duty originally required to be paid.

Registration of Property      

It’s now time to execute the final sale deed on the stamp paper. This means recording of document stating the changes in ownership and transactions of an immovable property. Whatever the source, even after you pay the sale price of the property, you do not become a legal owner until you get it registered. Ideally, you should get the property registered as soon as you get its possession.

After submitting the documents, you need to pay the registration fee to the tune of 1% of the value of property based on the respective circle rate. Hence, the registered document becomes a legal evidence of the transaction having taken place between the seller and the buyer.

Mutation of the Property

Once you get registered title deed, the final step is to apply to the municipal authority seeking mutation of the title of the property in your name. For this, you need to submit an application along with the copy of registered title deed and other necessary documents. After receiving your request for mutation, the concerned area officer will conduct an inspection of the property and decide the value for levying the tax on the property and, then issue a letter of mutation in the favour of the new owner.

However, there may be cases where that may not be possible as the registration process may have been closed by the state government. Such a situation occurred in Haryana a few years ago when registration of independent floor was closed for a considerable period of time. In such cases, you need to wait for the process to reopen. Also Read: Your Home Loan and Tax Planning!

 

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Suresh Kumar Narula

SEBI Investment Advisor, Founder & Principal Financial Planner at Prudent Financial Planners
Suresh K Narula is founder and Principal Financial Planner at Prudent Financial Planners. He has earned the professional CERITIFIED FINANCIAL PLANNER and got registered with SEBI as Investment Advisor. He writes on personal and financial planning articles and got published in Dainik Bhaskar, Business Bhaskar and The Financial Planner's Guild, India. He is also a member of Financial Planner's Guild India ( An association of practicing SEBI registered Investment advisers) to create awareness about Financial Planning in general public, promote professional excellence and ensure high quality practice standards. Suresh received his an M.com from Himachal Pardesh University and an MFC from Punjab University, Chandigarh. He can be reached at info@prudentfp.in
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