Transfer of property

16 Nov 2008, 0000 hrs IST, Ashish Gupta, ET Bureau

Transfer of property is handing over possession from one person to another. The Transfer of Property Act 1882 contains specific provisions on what constitutes transfer and the conditions attached. According to the Act, transfer of property means, 'an act by which a person conveys property to one or more other persons, or to himself and one or more other persons'. The transfer may be in the present or for the future.

Further, 'person' may be an individual, company, association or a body of individuals. Under the Act, property of any kind may be transferred. Every person who is competent to contract is competent to transfer property either wholly or in part. He should be entitled to the transferable property, or authorised to dispose off the transferable property if it is not his own. The right may be either absolute or conditional.

A transfer of property may be made without writing in cases where it is not expressly required by law. It can be transferred either absolutely or conditionally. Such transfer can be only to the extent and in the manner allowed and prescribed by law. The property may be movable or immovable, present or future.

Unless a different intention is expressed or necessarily implied, a transfer of property passes forthwith to the transferee all the interest which the transferor is capable of passing in the property and in the legal incidents. In case the property is transferred subject to a condition which absolutely restrains the transferee from parting with or disposing off his interests in the property, the condition is void.

The only exception is in the case of a lease where the condition is for the benefit of the lessor or those claiming under him. Sale of immovable property Sale is a transfer of ownership in exchange for a price. Such a transfer can be made only by a registered instrument.

Delivery of property is made when the seller places the buyer in possession of the property. Thus, delivery of property can be only by handing over actual possession to the buyer or to a person authorised by him. Charge Where the property of one person is made security for payment of money to another and the transaction does not amount to a mortgage, the latter person is said to have a charge on the property.

This can be by the actions of parties or by operation of law. The provisions of simple mortgage will apply to such charge. Lease of property A lease of property is the transfer of the right to use the property, made for a certain time, express or implied, or in perpetuity. Such transfer of right should be in consideration of a price paid to the transferor by the transferee, who accepts the transfer on the terms offered. Lease of property from year to year or for any term exceeding one year can be made only by a registered instrument.

Source:
Transfer of property- Financial Times-Features-The Economic Times

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Indian Real Estate Laws: Indian Transfer of Property Act & Indian Registration Act

If all you want to do is buy an apartment for yourself, its straight forward. But its different if you want to build an apartment complex or township or SEZ (special economic zone) with FDI (foreign direct investment) or ECB (external commercial borrowing).

Investing in real estate in India requires compliance with various laws, some 100 years old and some new. In addition to Central Govt laws, there are state laws governing real estate transactions and investment.

The Central laws governing real estate include:

Indian Transfer of Property Act

The Transfer of Property Act governs the transfer of property by various means. Sales, mortgages (other than by way of deposit of title deeds) and exchanges of immovable property are required to be registered by virtue of the Transfer of Property Act. Therefore, all the above documents must be in writing and registered.

Indian Registration Act, 1908

The purpose of this Act is the conservation of evidence, assurances, title, publication of documents and prevention of fraud. It details the formalities for registering an instrument. Instruments which require mandatory registration include:

• (a) Instruments of gift of immovable property;
• (b) other non-testamentary instruments which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, to or in immovable property;
• (c) non-testamentary instruments which acknowledge the receipt or payment of any consideration on account of instruments in (2) above.
• (d) leases of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent

Sales, mortgages (other than by way of deposit of title deeds) and exchanges of immovable property are required to be registered by virtue of the Transfer of Property Act. So all the above documents have to be in writing.

Section 17 of the Act provides for optional registration. An unregistered document will not affect the property comprised in it, nor be received as 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 it has been registered.

Thus the doctrine of part performance dealt with under Section 53 A of the Transfer of Property Act and the provision of Section 49 of the Registration Act (which provide that an unregistered document cannot be admissible as evidence in a court of law except as secondary evidence under the Indian Evidence Act) together protect the buyer in possession of an unregistered sale deed and cannot be dispossessed. The net effect has been that a large number of property transactions have been accomplished without proper registration.

Instruments such as Agreement to Sell, General Power of Attorney and Will have been indiscriminately used to effect change of ownership. Therefore, investors in real estate have to be careful in their due diligence.

Therfore, establishing “Clear Title” on your desired Indian Real Estate is more complex and time-consuming than it is in America or Europe. Please factor this in your due-diligence.

Reference: Real Estate Investing in India, Investing in Real Estate in India, Real Estate Investment laws in India for Foreign Investors, Real Estate Sector, Housing Sector