What is the procedure to buy property from NRI?

NRIs living abroad face many practical difficulties in coming to India to sell their property which can take from few days to weeks. It's not only difficult in arranging long leave but also significant travel cost.

Hence NRIs prefer to sell their property through General Power of Attorney (GPA) by assigning a person to do property registration formalities on their behalf.

Below is the systematic procedure to buy a property through GPA from NRI or from a person who temporarily resides abroad

1. Property Documents
2. Property Verification
3. Sale Agreement
4. General Power of Attorney (GPA)
5. Home Loan
6. Tax Deducted at Source (TDS)
7. Government Fee (Stamp Duty & Registration fee)
8. Sale Deed Registration
9. MODT Registration

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Below, we explained each step in detail

1.Property Documents:

As soon as you finalize a property based on your requirement and growth aspects, it's prudent on buyer’s part to collect property documents from seller for verification.

NRI seller can email you the soft copy of following primary documents

• Parent Deed
• Sale Deed
• Encumbrance Certificate
• Tax Paid receipt
• Khata
• Occupancy Certificate
• PAN and Passport
• Cancelled cheque

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2. Property Verification:

Verify above listed documents from a real estate lawyer, This is to ascertain the legal ownership of property, tax liabilities with property and to ensure that property is complying with various regulations.

Get the written verification report from lawyer.

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3. Sale Agreement:

The sale Agreement is probably the most important document in the whole chain of sale proceed because even the sale deed is executed based on the terms covered under sale agreement. Sale Agreement covers various aspects of sale such as:

• Indemnity clause
• Agreed cost
• Advance paid
• Penalty clause
• Right to call off the deal
• Procedures to be followed in case of default by either party
• Losses or obligations to be covered by buyer or seller and etc…

For your better understanding, let me give the real context of buying a property from NRI:

Mrs.Rajalakshmi lives in California, USA. She owns a 2BHK flat in Foyer City apartment in Doddathoguru village, Bangalore.

We saw this property listed on property website for sale. We connected Mrs.Rajalakshmi on Whatsapp call and toured the property.

We liked the property, After nearly 2 weeks of negotiation with Mrs.Rajalakshmi, we settled at the price of Rs 39 Lakh.

We followed below steps to execute a Sale Agreement:

Step 1: We prepare the sale agreement draft in word file

Step 2: Purchased non-juridical E-Stamp paper from co-operative bank near my place. The Stamp value is Rs. 3900 (Rs. 3900 is 0.1% of buying price Rs.39 lakhs)

Step 3: On 17–09–2022, we printed sale agreement draft on A4 size bond paper

Step 4: I (buyer) signed the sale agreement at bottom of all pages, including non-judicial e-stamp paper.

Step 5: We courier the signed sale agreement to Mrs.Rajalakshmi who is in California.

Step 6: Mrs.Rajalakshmi signed the sale agreement and couriered back to me. Below is the image sale agreement.

As soon as I received the sale agreement, applied for home loan.

Note:

• In the above, we listed only non-judicial e-stamp paper, 1st page and schedule pages of sale agreement (not all pages)
• As an alternative, you may frank the sale agreement at sub-registrar office instead of using non-judicial e-stamp paper

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4. General Power of Attorney (GPA):

NRIs grand general power of attorney to a person, to authorize property registration on his/her behalf.

If the General Power of Attorney is given to blood relatives like Mother, Father, Brother, Sister, Wife, Husband, Son, or Daughter. The Stamp is just Rs. 200

If the General Power of Attorney is given to non-blood relatives like Aunty, uncle, friend or colleagues. The Stamp Duty is 5% of consideration value

For Example: The selling price is Rs. 39,00,000

The Stamp Duty for non-blood relatives is Rs. 39,00,000 X 5% = 1,95,000/-

My seller Mrs.Rajalakshmi follwed below steps to execute General Power of Attorney from California:

Step 1: Mr.Rajalakshmi decided to give GPA to her father Mr.Seetharaman

Step 2: Mrs.Rajalakshmi draft the GPA in word file

Step 3: Printed the GPA draft on A4 size paper

Step 4: Affixed her passport-size photo

Step 5: Mr.Rajalakshmi carried the printed GPA and Passport to notary public near her place in California.

Mr. Rajalakshmi and two witnesses signed the GPA in front of notary. Notary sealed and signed the GPA

Step 6: Mr.Rajalakshmi couriered the GPA to India, to her father Mr. Seetharaman

Step 7: Mr.Seetharaman carried the following documents to Jayanagar District Registrar office in Bangalore

• Notarized GPA which came from California
• Passport copy of Mr.Rajalakshmi
• Aadhaar of Mr. Seetharaman
• K2 challan (Rs, 200 stamp duty receipt)
• Request Letter

Step 8: The Jayanagar District registrar's office verified the above-listed documents and adjudicated the GPA

Below is the image of adjudicated GPA:

Note:

• GPA should be adjudicated in the jurisdictions where the property is located.

For example: Bengaluru urban has five district jurisdictions, they are:

1. Gandhinagar
2. Jayanagar
3. Shivajinagar
4. Rajajinagar
5. Basavanagudi

If the property comes under Bengaluru Rural, the GPA should be adjudicated in Rajajinagar District Registrar's office.

• District Registrar may take 2 days to adjudicate the GPA

Day 1: The documents are verified and submitted for adjudication

Day 2: Come again on day 2 to collect the adjudicated GPA

• The executant (person who grand GPA) and attorney (person who accepts GPA) presences are not mandatory at the District Registrar's office for GPA adjudication. Your advocate or property agent can submit GPA on your behalf for adjudication.

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5. Home Loan:

Home loan process is triggered with the Bank. Home loan is the prominent way to fund your property purchase. AlsoHome loan makes you eligible for certain tax benefits that can save you lot of money. We can avail of home loan to buy under-construction or ready-to-move-in property.

Most banks decide the loan amount up to 60 times one’s monthly salary. If you are earning your monthly salary of Rs. 25,000, we can get a loan amount of Rs. 15 lakhs approx.

The first step in securing home loan is to provide following documents to bank for verification:

• Income Proof
• Property marketability (Seller’s Sale deed, Encumbrance Certificate, Tax receipt and Khata)
• Sale Agreement (shared the image above)

We triggered with Union Bank of India in PESSE Branch, Bangalore. We got our loan sanctioned in 15 working days and secured the loan amount of Rs. 25 lakhs. The bank’s representative was very helpful in entire process of loan sanction.

The bank issued the cheque in seller’s name Mrs.Rajalakshmi, we encircled the name below

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6. Tax Deducted at Source (TDS):

As per government regulation, buyer is responsible to deduct TDS from consideration and not the seller. If buyer does not discharge the duty of TDS payment, buyer can be penalized for non-payment.

For Indian residents: 1% TDS is applicable if consideration or guidance value is more than Rs. 50 Lakhs, whichever is higher.

For NRIs: Long-term capital gain tax is included in TDS. Below are the rates

• If consideration is less than Rs. 50 lakhs. TDS is 20.80%.
• If consideration between Rs. 50 lakhs to 1 crore. TDS is 22.88%
• If consideration is above Rs. 1 crore. TDS is 23.92%

Buyer should pay TDS on or before registration of sale deed, as the sub-registrar office verifies the TDS challan before proceeding deed registration.

In our context, Mrs. Rajalakshmi temporarily resides in California for job commitment. All the monitary transaction of sale proceed was remitted to her Indian SBI bank account (she didn’t hold NRI or NRO account)

Since Mrs.Rajalakshmi is a temporary resident in California and all the monetary transactions are remitted to her Indian bank account. Considering the selling price and guidance value is less than Rs. 50 Lakhs. TDS is not applicable for this property transaction, as the selling price is Rs.39 Lakhs only.

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7. Government Fee (Stamp Duty & Registration fee):

In Bangalore, the stamp Duty is different for different property limit

For Example:

• Property located in BBMP and BDA limit, the Stamp Duty is Rs. 5.1%
• Property located in Panchayat limit, the Stamp Duty is Rs 5.15%

Based on our context, Mrs. Rajalakshmi's property located in Doddathoguru village, which comes under panchayat limit. hence we paid following government fee.

• Stamp Duty: 5.15%
• Registration fee: 1%
• Cess on Stamps: 0.5%
• Scanning Fee Rs. 900
• Affidavit Rs. 40

% is based on consideration. My buying price is Rs. 39 Lakhs so we paid following government fees

• Stamp Duty at 5.15%: Rs. 2,00,850
• Registration at 1%: Rs. 39000
• Cess on Stamps at 0.5%: 19,500
• Scanning Fee Rs. Rs. 900 (approx. Based on number of pages)
• Affidavit Rs. 40

If you refer to our above Sale agreement, we purchased the non-judicial e-stamp value of Rs. 3900 (0.1% of Rs. 39 lakhs). We offset this cost when we pay stamp duty for deed registration.

Referring to below payment challan, we underpaid Rs.3900. We paid the stamp Duty of Rs. 1,96,950 instead Rs.2,00,850. We encircled it for your reference in below challan

We paid the above government fees on Khajane -II website https://k2.karnataka.gov.in/K2/index_en.html and generated payment challan. Payment is made through internet banking.

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8. Sale deed Registration:

Sale Deed is a written document that transfers the ownership of the property. Registration of the property is the process of ownership transfer as registration implies that the buyer (in whose name property is registered) is the lawful owner of the property with all rights, obligations and duties towards the same.

The objective of registration is to prevent fraud and disputes at same time maintaining public records. The immovable property can be registered at sub-registrar’s office within whose jurisdiction the property falls.

To register the sale deed, we drafted the below sale deed and printed on document paper

The property located in Doddathoguru village so we can register the property in any of the sub-registrar’s offices mentioned in below image

We decided to register in JP Nagar sub-registrar office. Seller & buyer carried following things to JP Nagar sub-registrar office

Buyer:

• Aadhaar & PAN
• Sale Agreement (shared the image above)
• To be registered Sale Deed (sale deed draft printed on document paper)
• Stamp Duty & registration fee payment receipt (K2 Challan)
• Bank’s cheque (final settlement to seller which we shared the image above)
• Active mobile phone for OTP Authentication

Seller:

• Sale deed
• Encumbrance certificate
• Tax paid receipt (latest tax receipt of 2022–23)
• Khata
• General Power of Attorney
• Active mobile phone for OTP Authentication
• Property Keys

In sub-registrar office, the officer verified the seller’s sale deed, tax paid receipt, khata, K2 challan, Aadhaar and PAN. Upon verification, the officer approved for registration

Seller and buyer are asked to sit at the registration counter for webcam photo, bio-metric thumb impression and OTP authentication. Buyer, seller and two witnesses signed the sale deed.

It took us around 3 hours to complete the registration including waiting time. We waited almost 45 min alone to scan the sale deed by officials at sub-registrar office. But our productive time was less than 10 min for webcam photo and biometric thumb impressions.

I think, our government already working to expedite waiting time by 10 min by implementing new technology. this initiative would be very useful, especially for senior citizens

(I wish buyers have option to upload all the preliminary documents including sale deed draft instead of taking printouts and signing on it. So public can use sub-registrar office only for bio-metric thumb impressions and webcam photos. Efficiency will improve when we reduce the dependency on paper. PAPERLESS REGISTRATION IS THE WAY FORWARD)

Below is our registered sale deed:

Immediately after the sale deed registration, we extracted encumbrance certificate to cross-verify the registration, refer to below image

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9. MODT Registration:

The abbreviation of MODT is Memorandum of Deposit of Title Deed.

MODT is applicable for home loan borrowers. MODT registration is an understanding given by borrower that borrower deposits title documents of the property with Bank in return for loan.

Below are the government fees for MODT Registration:

• Stamp Duty: 2% of loan amount
• Registration fee: 0.1% of loan amount
• Scanning fee: Rs, 350 (approx)

We collected MODT papers from bank one day before the registration. Our sanctioned loan amount is Rs. 25 lakhs + Rs. 24,000 insurance. The total loan amount is Rs.25,24,000/-

Refer to below MODT paper, we encircled total loan amount in below image

We paid following government fees and generated K2 challan. We made the payment through net banking.

• Stamp Duty at 0.2%: Rs. 5050
• Registration fee at 0.1%: Rs. 2530
• Scanning fee Rs. 350 (approx)

We registered the MODT in JP Nagar sub-registrar office. Refer to below registered MODT

We extracted the encumbrance certificate for cross-verification. In the below encumbrance certificate,

Row 1 is the MODT registration, we encircled the bank name in below image

Row 2 is the sale deed registration

Bank representative collected following tile documents

• Parent deed
• Sale deed
• Registered MODT
• Encumbrance Certificate
• Tax paid receipt
• Khata

Bank’s representative handed the cheque to GPA holder, the cheque is in favor of seller’s name Mrs.Rajalakshmi, refer to below image in circle.

GPA holder Mr.Seetharaman handover the property keys to buyer.

This completes the procedure to buy a property through Power of Attorney

Note:

Take scan copy of title documents before we handover to bank, because we may not able to access these documents again until the loan is cleared. Copy of title documents are must for Khata transfer, name change in tax receipt and utility bills

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We provide end-to-end assistance for transfer of property. Our service includes

• Verification report
• Sale Agreement including franking assistance
• Bank co-ordination for home loan sanction
• Sale Deed Registration
• MODT Registration
• Khata Transfer and name change in property tax receipt

To opt for our services, please WhatsApp to + 9 1 - 9 7 4 2 4 7 9 0 2 0.

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