Purchasing a Property, Stamp Duty & Registration

Which documents are to be verified before purchase of a Property?

Before you purchase a property, it is necessary to check title of the seller and also the relevant permissions in respect of the property to be purchased. The check list for verification of documents while purchasing under construction/ready possession property directly from the builder/developer is different than the checklist while purchasing a resale property in a registered society or apartments owner’s association or a Pvt. Ltd. Co. as the case may be.

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

1. Approved plan of the building along with the number of floors.
2. Ensure that the floor that you are buying is approved.
3. 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.
4. 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.
5. Check specifications given in the agreement to sell of the sale brochure. Is he providing the same actually on the ground or not?
6. Check the reputation of the builder.
7. Ensure that urban land ceiling NOC (if applicable) has been obtained or not.
8. NOC from water and electricity authorities also have to be obtained.
9. NOC from lift authorities.

What is the difference between built up area, super built up area, and carpet area?

Carpet Area: As per IS:3861-1975 (Reaffirmed 1992) of BUREAU OF INDIAN STANDARDS (BIS) (Government of India Recognised body for weight and measure), carpet area is full area of a house excluding area of all the walls in the house, kitchen, passage, toilets, 50% of balcony area etc. But in actual practice this method is not adopted.

Carpet area for the purpose of stamp duty is rent-able area which in exclusive possession of owner. It is measured from finished wall to finished wall above the skirting level or above the dado level in case of toilet blocks and in case of open balcony area is taken as 50% of area and closed balcony is be measured in full.

Floor Area: Floor area is Carpet area as per BIS mentioned above plus area of kitchen, passage, toilets & balcony.

Built-up Area: Built-up area is floor area plus area of all the walls around it. In case of terrace flat, area of terrace attached to flat must not be included in built-up area. Exclusive terrace area should be separately mentioned. Areas of the common passage, stair case area and lift are also not included.

Super built-up area. (Plinth Area, Saleable Area): Super built-up area is built-up area plus proportionate area of lift, staircase and common passage etc. One should always insist the builder to mention actual carpet area in the agreement and not the built-up or super built-up area because the procedure of reduction of 20% from super-built-up area to arrive at built-up area stand withdrawn and mentioning of carpet area in the agreement is mandatory as per the prevalent law.

What is stamp duty? Why should stamp duty be paid ?

It is a tax, similar to sales tax (VAT) and income tax collected by the government. Stamp duty is payable under section 3 of the Bombay Stamp Act, 1958. Different amount of stamp duty is payable for different type of documents as per Schedule – I of The Bombay Stamp Act, 1958. Stamp duty must be paid in full and on time. If there is a delay in payment of stamp duty, it attracts penalty. A Stamp duty paid document is considered a proper and legal document as such gets evidentiary value and is admitted as evidence in the court. Document not properly stamped, is not admitted as evidence by the court.

When is stamp duty payable?

It is payable either before execution of the document or on the day of execution of document or on the next working day of executing such a document. Execution of a document means putting signatures on the document by the persons who are party to the document. However, it is advisable to pay stamp duty before executing the document, for all practical purposes.

Who is liable to pay stamp duty?

In the absence of any agreement to the contrary, the purchaser/transferee has to pay stamp duty or in case of exchange of properties, both parties have to bear stamp duty equally.

What are the documents on which stamp duty is to be paid?

Under the Bombay Stamp Act, 1958, stamp duty is to be paid on all documents by which any right or liability is or purports to be created, transferred, limited, extended, extinguished or recorded but does not include a bill of exchange, cheque, promissory note bill of lading, letter of credit, policy of insurance, transfer of shares, debentures proxy and receipt, which is charged under Indian Stamp Act, 1899.

Is stamp duty payable on the document or transaction?

It is payable on document and not on transaction, stamp duty is charged on the basis of the contents of the document only. If any information essential for working out stamp duty is missing in the document, valuation officer can call for the same. Information such as the carpet or built-up area of the flat, number of floors in the building, year of construction, name of Division/Village and C.S./C.T.S. number of plot of land on which property is situated must be mentioned in the agreement.

Who is liable to pay Stamp Duty?

From 04.07.1980, on conveyance, the purchaser is required to pay stamp duty on market value of the immovable property transferred as per article 25(b) at the time of execution of the conveyance. Whereas, prior to 04.07.1980 there was no market value concept and agreement value was accepted for stamp duty payment. Hence date 04.07.1980 relates to arrival of market value concept.

From 10.12.1985 even on agreement for sale, the purchaser is required to pay stamp duty on market value of the immovable property transferred as a deemed conveyance due to explanation appended to Article 25(d), at the time of signing the agreement for sale itself. Whereas, prior to 10.12.1985, such agreement for sale required a stamp of Rs.5 only, at the time of signing the agreement under article 5(h) provided stamp duty as applicable to conveyance will be payable at the time of conveyance of the immovable property in future. Hence date 10.12.1985 relates to arrival of deemed conveyance concept.

In whose name the stamp paper required to be purchased?

From 01/05/1994 stamp paper is to be purchased in the name of one of the parties to the document. If the stamp paper is not in the name of one of the parties and if it is used for preparing the agreement then such agreement will be treated as if no stamp paper was used. However, it will not make the agreement invalid and can be enforced in law if proper stamp duty is paid subsequently. Prior to 01/05/1994 stamp paper could be purchased in any name.

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 in relation to any property which is the subject matter of the document means the price which such property would have fetched if sold in the open market on the date of execution of such document or the consideration stated in the document, whichever is higher. However, for payment of stamp duty, market value is the value as worked out as per the stamp duty ready reckoner or the consideration stated in the document, whichever is higher. As per section 50C of the Income Tax Act, the market value for the purpose of capital gains tax is the same as the market value for stamp duty payment, which is worked out as per the stamp duty ready reckoner. Hence, it is advisable that the seller should record the actual selling price worked out with the help of ready reckoner and avoid under-valuation with the intention of saving capital gains tax.

Stamp duty is payable on the market value of property. Market value of any property is determined by the stamp duty authorities on the basis of the stamp duty ready reckoner issued by the government every year on January 1. If the consideration amount is higher than the market value, the consideration amount will be treated as market value. However where property is sold or allotted by a government or semi-government body or a government undertaking or a local authority such as LIC, CIDCO, BMC, MHADA, the Income Tax Department on the basis of predetermined price, then that value is accepted as market value for the purpose of stamp duty.

Stamp duty ready reckoner is a public document as is published every year by The Architects publishing Corporation of India and is available in any law book shop.

How does one ascertain the right amount of stamp duty? What is Adjudication ?

One can find out the market value of a property and the property and the proper stamp duty amount on it from the Stamp Duty Ready Reckoner and Market Value of Flats/Properties in Mumbai as flows:- If the property is situated in Mumbai City (i.e. from Colaba to Mahim/Sion) one should know the Division name C.S. No. (CadestralSurvey No.) of that property and if the property is situated in Mumbai Suburb (i.e. form Bandra to Dahisar and form Kurla to Mulund) one should know the Village name and C.T.S. No. (Chain and Triangulation Survey No.) of that property. This information is available from property card of the land on which your property is situated and a copy of property card is generally available from the society office or from original builder’s agreement.

From the ready reckoner, locate valuation zone and sub-zone with the help of division/village name and C.S./C.T.S. No. of the property.

From Ready reckoner, know the market value rate per square meter, then multiply the rate with the built-up area or carpet area (if the rates are for carpet area) of property in square meters. One will get the value. Reduce or increase this value for lift and depreciation as per valuation factors given in the Ready Reckoner to get the market value. Find out the stamp duty amount applicable as per the market value. For this purpose stamp duty ready reckoner and market value of flats/properties in Mumbai is published regularly by the Architects Publishing Corporation of India and it is readily available in the market.

The Department also does this procedure for a nominal fee.

1. The process of valuing the property and arriving at its market value and ascertaining the proper stamp duty is called adjudication.
2. For adjudication, one can apply to the collector of stamps along with a copy of the agreement containing details of the property.
3. Adjudication fees payable is Rs.100/-.
4. In case of a signed document, adjudication must be done within one month otherwise two percent interest per month will be levied as penalty from the date of signature.
5. An adjudicated unsigned document is valid up to six months from the date of adjudication order or up to December, 31 of that year, whichever is earlier.
6. Documents can be adjudicated at the offices of Collector of Stamps whose address are given elsewhere in Ready reckoner.

What is registration?

As per section 17(1) & Section 17 (1A) of the Registration Act, 1908 various documents relating to transfer of movable and immovable properties are required to be registered. Registration is legal formality wherein the document, which is required under the law to be registered, undergoes the following procedure by the Sub-Registrar of Assurance of the respective district. After completion of these procedures, the documents is considered as registered.

The Sub-Registrar of Assurance does the following:-

1. He verifies the document to ascertain whether it is legal to register such a document.
2. He further verifies that full stamp duty is paid on that document before registration.
3. In his presence all parties, executing the document, admit that they have executed the document presented for registration. Parties who are present and admitting to execute the document are then personally indentified by two independent witnesses. All the parties and all the witnesses present, again sign in the presence of sub-registrar on an additional page attached to the document.
4. Parties to the document are photographed and their left hand them impression is taken and such photograph and thump impression is affixed on additional pages attached to the document apart from colour photographs and thump impression which a person affixes in the agreement while executing the document. From 06.06.2007 photographs, proper identity proof and thumb impression of witnesses is also taken, and attached to the document.
5. He puts his official seal on each page and puts a unique numbering block with page number on each page of the document including the additional pages. On the last page he signs the document as being registered.
6. After completing the above procedure, he records the content of the document, including the additional pages, either by photocopying the content or by scanning the content of the document. He permanently retains the photocopy of scanned images in his records so that in future whenever a copy of the document is required it can be obtained. This copy becomes a public document, which anybody can inspect by paying inspection fees and also can procure a certified true copy.

After taking a copy of the document, as mentioned above, on the record and after completing the above formalities original document is handed over to the party for obtaining one photocopy of the registered document. Photocopy should be taken on only one side of paper and paper should be of 90 GSM thicknesses and there should be butter paper in between two sheets on the photocopy. After original and butter photocopy is given back to sub-registrar, he verifies the original and photocopy and then the original document is returned to the party presenting the document for registration. This completes the process of registration, which takes about 30 minutes in Mumbai.