A 19-page Supreme Court judgment on October 11 could go a long way in clearing up the murk in property deals. The court has clarified that a general power of attorney, sale agreement or will transfer does not effectively transfer ownership of immovable property, and cannot be recognised as a sale. For changes to be made in municipal or revenue records, a registered sale deed is necessary. The judgment notes that such power-of-attorney transactions, which were only prevalent in Delhi and neighbouring states, are spreading to other states.
One likely effect of the judgment is that buyers will exercise greater caution and prefer to deal directly with original landowners or, at least, insist on their presence while negotiating a deal.
Another possible outcome is that states will reduce stamp duty, which would encourage people to register transactions and pay duty. Until now, buyers and sellers in large deals seldom negotiated face-to-face. Real estate developers typically negotiate through an agent who secures a general power of attorney from the original property owner, often by paying the owner a fraction of the market price. The process is often murky, with the agent 'persuading' the owner to part with his or her property through intimidation.
|A copy of the full judgment is at www.businesstoday.in/gpa|