|
There are various laws that govern the transactions of residential, commercial and leisure premises in India. The salient features are covered in depth in the Forum section. It will elaborately discuss topics such as outright sale of residential properties, commercial properties, timeshare buying etc.... |
| |
|
 Residential flats on lease |
|
| Outright Sale of Residential Property |
|
| |
|
| Residential flats on lease |
|
In India, how can one acquire a residential property on a rental basis?
What are the factors involved in determining rent on residential properties?
What are the legal procedures involved in acquiring residential properties on rent?
What are the clearances required to lease a residential property?
How are lease agreements made?
What is advance rental?
What is the security deposit?
What are the additional costs involved in lease of residential properties?
What is the tenure of Lease agreement ?
Top |
| |
|
| In India, how can one acquire a residential property on a rental basis? |
|
One can acquire residential property in India on rent by making a Leave and License Agreement between the owner of the said property who is called the Licensor and the interested party who is called the Licensee. The Licensor and the Licensee have to enter into a Leave and License Agreement that state the terms of lease along with compensation payable for leasing the flat.
Top |
| What are the factors involved in determining rent on residential properties?
|
|
There are two main ways of leasing the residential properties. They include the advance rent basis and an Interest free security deposit along with a monthly rent.
Advance Rent basis : The properties are leased by paying advance rent for the tenure of the lease period.
Interest free Security Deposit : The properties are leased by paying an interest free deposit amounting to 40% of the value of the property along with a monthly rent.
For eg : If a property is worth Rs. One Crore, then in such a case the interest free security deposits will be valued at Rs 40 lacs and a nominal rent of Rs 10,000 to 20,000 is payable subject to negotiations.
The interest free security deposit is returnable at the end of the lease period by the Licensor to the Licensee on handing over the vacant possession of the property.
Top |
| What are the legal procedures involved in acquiring residential properties on rent? |
|
The following are the legal procedures involved in acquiring residential properties on rent:
1. The interested parties have to enter into a Leave and License Agreement that is drafted on stamp paper and is witnessed by a third person.
2. The lease agreement is preferably backed by a Bank Guarantee/ Court Consent Decree / Corporate Guarantee for vacant possession of the flat to the Licensor.
3. The Lease Agreement can also be registered as well as notarized to make the said transaction more authentic.
Top |
| What are the clearances required to lease a residential property? |
|
One needs to obtain a N.O.C from the society in order to get a clearance to lease a residential property.
Top |
| How are lease agreements made?
|
|
Lease agreements are drafted on a stamp paper within the interest of both the parties. The terms and conditions of lease are quoted in the agreement along with the lease period. The lease agreement in most cases are backed by a bank guarantee or a court consent decree. Both the bank guarantee and the court consent decree are a security to the licensor to regain the possession of the vacant flat at the end of the lease period. The agreements are normally drafted by solicitors, advocates and chartered accountants.
Top |
| What is advance rental?
|
|
In cases where properties are available on advance rent basis, rent for the lease period is paid in advance along with a security deposit for a period of three months which is refundable at the end of the lease period.
Top |
| What is the security deposit ?
|
|
The security deposit system was incorporated to avoid high taxation on rentals as well as to safeguard the property against tenancy by the Licensee. The security deposit also provides security to the licensor against value of the said property and is interest free therefore the Licensor can earn interest on the security deposit or use the security deposit for his financial investment. The security deposit is returnable at the end of the lease period to the licensee after deducting any outstanding payable by the licensee.
Top |
| What are the additional costs involved in lease of residential properties ?
|
|
The licensor on leasing the property has to bear non-occupancy charges payable to the society for the lease period. Brokerage has to be paid to the broker if the licensor and the licensee have used services of the broker to structure and facilitate this transaction.
Top |
| What is the tenure of Lease agreement ?
|
|
The lease agreements are normally made for a period of 33 to 36 months and a lease agreement can be made for a longer lease period of 9 years with an escalation of 15-20% every three years in rentals.
There are various laws that govern the transactions of residential, commercial and leisure premises in India. The main aim of the Forum section is to cover the salient features in depth. It will elaborately discuss on topics such as outright sale of residential properties, commercial properties, time share buying etc....
Top |
| |
|
| Outright Sale of Residential Property |
|
How can one acquire a residential property in India?
What are the factors involved in selecting a residential property?
How should a prospective purchaser evaluate the price of the property?
What are the legal procedures in the acquisitions of residential property?
How is a purchase agreement made?
What is a clear marketable title of a property ?
What are the clearances required to acquire a property ?
What are transfer charges ?
What is stamp duty ?
Are there any other duties/levies payable to the State Government?
How is the area/size of the property calculated?
What are the charges payable to property consultants?
Top |
| How can one acquire a residential property in India? |
|
In India one acquires residential property through Estate Agents, advertisements in newspapers, individual sellers or builders.
Top |
| What are the factors involved in selecting a residential property? |
|
While selecting a residential flat, the purchaser of the flat should check the quality of construction, the security of the building, accessibility of the building as well as maintenance of the building by the society or the committee that is involved in the up keeping of the building. One should also check the water supply facility as well as the fire fighting systems installed in the building . In case of buildings with lifts, one should always check the lifts and other security systems that are installed in the building.
Top |
| How should a prospective purchaser evaluate the price of the property? |
|
The rates of the property that are quoted by the builder or the individual seller or an estate agent, can be evaluated after scrutinizing documents of the last transaction made in the same vicinity of the property. Incase the property's value is above the prescribed limit laid down by Central Government for preemptive purchase which in Mumbai is Rs 75 lakhs, in such a case one could always refer to the income tax department's list 37 (I) which confirm the rates of property that has been sold. This gives a clear indication to the prospective purchaser of the prevailing rate per sq.ft. of the property.
Top |
| What are the legal procedures in the acquisitions of residential property? |
|
In case the property is a direct sale from a builder, one should scrutinize the document stating clear title ownership of the builder for the said premises. In case the property is a second sale.
Eg : If an individual is making a sale of property in such a case one should scrutinize this previous purchase agreement as well as check the ownership title of the said property.
Top |
| How is a purchase agreement made? |
|
A purchase agreement is drafted by a lawyer or a solicitor. It should always be drafted on stamp paper which indicates the interest of the seller to sell the property to the purchaser along with the consideration being paid for the said property.
Top |
| What is a clear marketable title of a property ? |
|
A clear marketable title of a property means that, the property is free from all encumbrances and is absolutely owned by the person or individual who is selling the said property.
Top |
| What are the clearances required to acquire a property ? |
|
The following are the basic clearances required to acquire a property:
a. A No Objection Certificate (NOC) from the society where the property is located, however if a property is purchased from a builder no such NOC is required.
b. The income tax department 37 (I) clearance is required if the property is above the value prescribed by the appropriate authority constituted under Income Tax Act, which value is Rs 75 lacs in Mumbai city.
Top |
| What are transfer charges ? |
|
When there is a transfer of ownership of property, a legacy of transfer charges has to be made. These charges are borne equally between buyer and seller. The quantum of transfer charges varies from society to society. The maximum transfer charges that a society can charge is Rs 25,000/-
Top |
| What is stamp duty ? |
|
The stamp duty is a state levy that is payable on the document normally by the purchaser to the state government. The stamp duty is payable on the purchase price of property as indicated in the purchase agreement. The stamp duty payable is Rs 38,750/- on amount of Rs 10 lakhs and 8% on the balance consideration/market value of property if property is purchased in Co-operative Housing Society otherwise stamp duty is at 10%. The stamp duty is payable at the state government's office and is applicable to all properties.
Top |
| Are there any other duties/levies payable to the State Government? |
|
The document also attracts registration fees payable at 1% of consideration or Rs 20,000/- whichever is lowest. However in case of transaction in a Co-operative society registration is optional.
Top |
| How is the area/size of the property calculated? |
|
The area/size is always calculated on property in terms of sq.ft. Properties are sold in built up and super built up areas. The ratio of the built and super built area is between 15% to 25% depending on the seller's choice.
Top |
| What are the charges payable to property consultants? |
|
If one desires to use the service of the property consultants or estate agents to purchase residential property the standard fees payable for structuring and facilitating transactions is 2% on the agreed sale price but there have been cases where estate agents/consultants have negotiated their services and accepted 1% on sale price.
Top |
