No Property Sale by GPA in Delhi

All power of attorney property deals banned

In an order that puts thousands of property transactions in Delhi under a cloud, the revenue department has made all realty sales through transfer of general power of attorney null and void with retrospective effect from October last year.

The order, dated April 27,directs all 13 sub-registrar offices, DDA and NDMC to follow the Supreme Courts order last October that no sale deed will be registered if it is through a GPA transfer. This means transactions carried out since October on GPA transfers will have to be registered afresh with complete documents.

On average, around 20% of registries are done through GPA transfers, a common way of selling leasehold properties and those that dont have a clear title.In Delhi's northwest district, for instance, of 5,300 documents registered across three sub-registrar offices in March,1,157 were GPA transfer registries.Bankers said the proportion of GPA transfers were even higher in sales involving bank loans.

PRICE OF FREEHOLD PROPERTIES MAY RISE

THE ORDER

No sale deed will be registered if it is through transfer on general power of attorney All transactions carried out since last October on GPA transfer now null and void. Both sellers and buyers will have to initiate registration process afresh with complete documents

THE EFFECT

Properties that cant legally be sold will become truly immovable If someone has bought a property on GPA and registered it prior to Oct 2011,a sale will be possible only if the property has been converted to freehold and clear title for the property obtained If conversion to freehold hasnt been done,but is allowed,the GPA can be used to do the conversion

IMPACT ON PRICES

Properties which are freehold and to which title is clear likely to become more expensive Supply of saleable properties will drop since those held on GPA cant be sold

Times of India, New Delhi, 04-05-2012

Clear Title Deeds & Cleaner Transactions: Govt.

Ban Effective From Last Oct; Revenue Dept Says Sub-Registrar Offices Were To Execute It

A revenue department order has made all realty sales through transfer of general power of attorney (GPA) null and void with retrospective effect from October.
Top revenue department officials steered clear of taking responsibility for the delay in implementing the Supreme Court order. They said that as this was a Supreme Court order, it should have been implemented at the sub-registrar offices since October. They admitted, however, that registrars have only stopped registering such sale deeds after the April 27 directive from the revenue secretary and divisional commissioner Vijay Dev. Realty watchers said the order will reduce the number of saleable properties in the capital and lead to a hike in the value of properties on freehold land. Citing the October 11,2011,judgment of the Supreme Court, the revenue department circular says, It is reiterated that immovable property can be legally and lawfully transferred only by a registered deed of conveyance (sale deed) GPA sales of SA (sale agreement)/ GPA/will transfer do not convey title and do not amount to transfer, nor can they be recognized as valid mode of transfer of immovable property. The court will not treat such transactions as completed To ensure that the Supreme Court order is followed, I have issued a circular informing all officials involved in registration of documents to not register any sale deeds on a GPA transfer, Vijay Dev told TOI. He said it was required as GPA transfer transactions left no evidence of how many hands a property might have changed hands. There are also loopholes in GPA transfer cases as property papers may not be complete or a property may not have the requisite completion certificates. In such cases, Dev said, there were greater chances of a buyer landing in litigation. The implementation of the court order would mean cleaner transactions with clear title deeds and also higher revenue to the state as each sale of the same property will have to be duly registered on payment of stamp duty, he said. However, the retrospective order has thrown thousands of property sales after October on GPA into uncertainty. Owners who bought property on GPA because it lacked perfect documentation are now in trouble because legally the property remains in the sellers name. Both parties will now have to initiate the process of transfer of property through clear sale deed. The problem is, due to archaic regulations, many properties in the do not have clear titles. Take for example co-operative societies that do not have a completion certificate because the builder did not follow rules during construction. A flat owner in such a society, who may be in possession of the property for decades, will not be able to sell it. Most of apartments in cooperative housing societies and DDA condominiums are sold though GPA. Now, if the societies have completition certificate and the original buyer has cleared all the dues, these property can be converted into freehold. Only after that its owner can sell it through registered sale deed. Anshuman Magazine, MD of global consultancy firm CBRE (South Asia,) said that banning transactions through GPA would bring in transparency. But before issuing the order, the government should have conducted a special drive to give completion certificates to properties, he said. Also facing uncertainty are houses in unauthorized colonies because very few properties here have a clear title. These house owners too would have encounter problems in selling the property. The order also provides an opportunity for middlemen to take advantage of the situation as the demand for converting properties to freehold is likely to surge. In practice, such conversions are usually carried out through touts.

Times of India, New Delhi, 04-05-2012

  Wary Property Dealers Call for Easy Conversion

The ban imposed by the Delhi government on general power of attorney as a mode of property transfer, following a Supreme Court order, is expected to impact the entire property market. Property dealers say that while the ban was required to regularize property transactions, in the absence of a simple and clear procedure for converting leasehold property or property held under GPA into freehold, transactions may fall sharply, at least for a while. The move is right that's how it should be. Property should not be transferred through power of attorney. However, along with this, the government should improve the process, the system of transfer so that people don't suffer. A majority of owners go for GPA because they don't have a choice. I think residential property will be hit the most, says Anshuman Magazine, chairman and MD, CBRE South Asia Pvt. Ltd. Commercial property owners are feeling the pinch as well. If the government does not come up with a correct formula for conversion of leasehold property into freehold, there'll be hardly any transactions in commercial blocks, says Alok Batra of Aakar Properties and Investments. He explains that conversion into freehold will be a hugely complicated affair in business districts such as Nehru Place, Bhikaji Cama Place and Connaught Place. You have to get the entire plot converted before you trying selling individual units. Who will get it converted There can be disagreements about freehold conversion charges. There are a lot of technical issues, says Batra. They had made these provisions. If they withdraw them, how will transactions happen Not everyone is worried however. Mahesh Gupta of Mukul Consultants Group welcomes the ban. Deals made via power of attorney involve black money. If someone sells his property for Rs 100 crore, he may show just Rs 2 crore in the sale deed. But in freehold property, they have to show at least the circle rate, which may be Rs 50 crore, he explains. In the case of older residential areas with individual plots, the process will be relatively simpler. The buyer can insist on the seller converting his property first, says Batra. Its unauthorized colonies that will be worst affected. It is there that maximum transfers through GPA take place, says real estate analyst Pradeep Mishra. Though the ban may deter property deals for a while, it will benefit property owners in the long run, feels realtor Nagesh Mahajan. Property has no value under power of attorney. One cannot get even a bank loan against it. Conversion gives owners all the legal documents they need, he says. Typically, if all papers are in order, conversion takes about three months. Reality though is different. Ashwani Singh Virk, proprietor, Jagson Realtors, says many properties are stuck in the conversion stage for several months. Government levies penalties on some commercial properties if the area is overcrowded or if part of the property is used for a purpose other than what is specified. These penalties can run into several lakhs and owners cannot get their properties converted without paying. Conversion also requires a complete chain of documentation and some older properties may not have every document.
Dealers say the number of transactions through the now banned mode is appreciable. About a third of the deals we handle are via power of attorney, says Gupta. Ravinder Bakshi of BVM Infrastructure Pvt Ltd says business for his firm might decrease by as much as 20-30 %.

Times of India, New Delhi, 04-05-2012

Why is GPA registered

What is a general power of attorney ?

A power of attorney is an instrument that is used by people to confer authority on somebody else to legally act on their behalf. They can be of two types special power of attorney (SPA) and general power of attorney (GPA). While an SPA is used for transfer of a specific right to the person on whom it is conferred, the GPA authorizes the holder to do whatever is necessary. For example, in property sales using this instrument, the buyer gets a GPA from the seller not only for his own use of the property, but for further sale to someone else if he so desires. Of course, a GPA holder can only sell the property through another GPA.

Why is this used in property transactions ?

Many properties cannot technically be sold for a variety of reasons. For instance, the original owner may have got it from an institution like DDA at a below-market rate and DDA may have imposed a minimum period for which it must be held. Any sale before this period is not legally possible, so a GPA may be resorted to.Or, the property could be part of a housing society which has got the land on lease. In such cases, the owner of the property actually has only a certificate from the society allowing him to use it, but not to sell it. It is only when the property is converted from leasehold to free-hold that he gets the title to the property. That is when he actually becomes the owner and, hence, is entitled to sell it.

How is the GPA used in such cases ?

The person wanting to sell grants a GPA to the buyer. Typically, the buyer will insist that the GPA must be irrevocable, since he wants to ensure that the seller does not renege on the deal after the money has been paid. He will also insist on a will and perhaps even on all legal heirs of the seller submitting affidavits revoking their claim to the property. The GPA also specifies that he has the right to sell the property when it is saleable or transfer it to anybody else at his discretion. Typically, the right to get the property converted to free-hold is also specified in the GPA.

Why does a GPA have to be registered ?

The government realized properties were being bought and sold through GPAs and no stamp duty was being paid on these transactions. To stop this and boost its revenues, in 2004,the Delhi government made it mandatory for GPAs to be registered at 90% of the stamp duty rate applicable to sale deeds. It made it clear the GPAs that are not registered will have no legal validity.

What has the Supreme Court done ?

In October, SC ordered that no further transfer of property should be allowed through GPAs. Most states banned the use of GPAs for this purpose soon thereafter. But the Delhi government passed an order to this effect only last week.

What effect will this have ?

For the future, it means properties that cannot legally be sold will become truly immoveable. As for the past, transactions for properties in Delhi for which GPAs have been conferred since October 11,2011,become null and void for legal purposes.

If someone has bought a property on a GPA which has been registered prior to October 2011 and now wants to sell it, can he sell it ?

A sale will be possible only if the property has been converted to freehold and title for the property obtained. The GPA on its own will not suffice. If the conversion to freehold hasn't been done but is allowed, the GPA can be used to do the conversion.

Will property prices go up or down ?

Properties which are freehold and to which title is clear will become more expensive as the supply of saleable properties will come down since those held on GPA cannot be sold.

Times of India, New Delhi, 04-05-2012

Is 3rd Floor Just Castle in Air SC Must Rule

Five years ago, Delhi was given a new master plan. This had been drafted after a spate of sealing and demolition orders, many issued by the then Chief Justice of Supreme Court. Soon after the new MPD 2021 was notified in February 2007,Supreme Court began adjudicating on many of the new planning tools suggested by the new master plan. In a nutshell, the issues before the apex court were matters which are constantly being worked upon by urban planning professionals in almost all cities issues of redevelopment and enhancing infrastructure to cope with changing cityscapes and needs of citizens.
In some ways, the apex courts eagle eye was welcomed by many urban professionals as a good development though some frowned at the judicial scrutiny as many urban development issues are complex and need a combination of solutions to throw up results and improvements in cityscapes. Matters which were being adjudicated included how high buildings could be allowed to be built, how infrastructure development could go hand in hand with conservation of historically valuable city assets, how pedestrians should be given due attention by the new redevelopment policies and how many of our traditional marketplaces need rejuvenation and revamping of safety standards. MPD 2021 also introduced another crucial aspect of planning though the validity of the MPD is 20 years, it was proposed to be reviewed every five years. To achieve this end, it suggested methods of review and the setting up of task forces of professionals. That exercise is now on. However, the matters before Supreme Court are still undecided, in fact hardly argued or discussed at all.
During the past five years, thousands of residential buildings have added a third floor. Ironically, all such constructions sanctioned under MPD 2021 have been formalized on the strength of an affidavit which each owner gives stating that her or she shall abide by the final judgment of Supreme Court when it is pronounced and that no equity shall be claimed if ultimately it is found that MPD 2021 suffers from infirmity, and that if demolition of unauthorized and/or impermissible construction is to be made, the same shall be carried out. So we now have a situation, five years after MPD 2021 was notified, of the city still waiting to hear whether it suffers from infirmity or not. And if it were found to be infirm, millions of square metres of built-up space will have to be demolished! When will be the matter be resolved Its anyones guess. Cities redevelop constantly and urban planners have the tough job of trying to balance between the past and future, trying desperately to project demand and to juggle with supply mismatches and improve the citizens habitat while dealing with issues emerging out of changing transport systems, changing aspirations of citizens and a host of such matters. There are no sure shot solutions in city planning but this delay can only make matters more complex.

Times of India, New Delhi, 04-05-2012

Act in Cold Storage Can Break GPA Impasse

The Delhi government, implementing a Supreme Court order, has refused to accept general power of attorney (GPA) as a valid instrument for property transactions. However, a way out of the impasse could be the not-so-well-known Delhi Apartment Ownerships Act 1986,notified by Delhi Development Authority. Lack of publicity has meant that few know and use the Act. Notified way back in 1987,the Act allows sale of an apartment in any multi-storey building, irrespective of whether its a group housing society or a builder-promoted or DDA project. Rajesh Tyagi, an advocate, said: Under this Act, a deed of apartment has to be executed between the promoter and the owner of the apartment and this will be treated as a legal transaction of ownership. According to Tyagi, sale of property is a simple process under this Act and will come in handy for hundreds living in flats in multi-storey apartments. However, the Act has not been publicised by DDA, resulting in most people going in for a GPA, added the lawyer. DDA admits that the Act has been notified several years ago. A notice on its website, however, says that the Act has not been implemented as the government hasn't yet appointed a registrar or administrator to implement it. Sanjeev Kumar, an apartment owner and president of Delhi Residents Front, says, For several years, we have been fighting for implementation of the Act. Yet, despite a direction from the high court on May 28,2010,the DDA has been persistently avoiding publicizing the Act. According to Kumar, the Act is the best way for transfer of property in multistorey buildings in the capital and may prove to be a boon for the middle class. It covers any building that has more than four floors and has a lease of more than 30 years from the DDA. Since its the superstructure that is changing ownership and not the land, there is no need for either a GPA or conversion to freehold. All you need is the deed of apartment executed in the owners name, which can then be registered as a clear title, added Kumar. And since the Supreme Court order doesn't mention the deed of apartment, it also steers clear of the October 2011 order, say experts.
A senior DDA official admitted: There have been no property registrations under this Act till date. Avtaar Singh Gabri, a resident of Sai Apartments in Rohini, and one of the litigants in the high court case against DDA in the 2010 order, says, We have formed apartment owners associations to raise awareness about the Act. However, DDAs refusal to appoint an administrator and the lack of initiative on the part of promoters to publicize the Act has kept it a secret.
With Delhi government implementing Supreme Courts 2011 order, it looks like its time the DDA threw light on Delhi Apartment Ownership Act 1986.

Times of India, New Delhi, 05-05-2012

Govt. Should Have Launched Freehold Drive

The home owners in Delhi, who bought their house on general power of attorney, are confused about the governments decision to ban property transactions through GPA. According to MD of India Homes Samarjit Singh, the decision will affect at least one-third of Delhi's legal properties in authorized colonies.
According to the Delhi government order, a property can no longer be sold on the basis of a GPA or agreement to sell or will. A transaction will be valid only if it has been done through a proper registered sale agreement. In cases where a property has been assigned a clear title but was sold on GPA, the problem is not so acute. The buyer can convert a leasehold property into freehold by paying a charge. The real problem will be faced by those owners whose assets have not been assigned a clear title by DDA due to certain reasons, which could include violation of the approve building plan. Also, a house may have been sold or allotted by DDA to a certain section of society with the condition that it wont be sold off but the owner may have violated the condition. In such a case, there cant be any sale. Navin Raheja, CMD of Raheja Developers, who is a former chairman of National Real Estate Development Council (NAREDCO), says the problem arises because of DDAs inaction in a large number of cases. In many areas, illegal constructions and use of property in violation of the zonal master plan have been observed. Instead of taking proactive steps to not allow such constructions, DDA resorts to banning of registration of sale deed or conveyance deed of the properties in the area. Such properties are then purchased through GPA and sale agreement resulting in revenue loss to the state and title disputes. Raheja said that once a building is constructed, authorities should work out a mechanism to ensure there is no restriction on registration of sale deed or conveyance deed even if construction or occupation are not in conformity with the zonal master plan. Samarjit Singh said that prior to banning transactions on GPA,the Delhi government should have given home owners enough time to convert their properties into freehold. The decision now will mean immense hardship for home owners whose property is leasehold. If the DDA has not issued a clear title to the property, the owner just cant take the freehold route. Singh said DDA should have organized a special drive to issue a clear title to such properties and then asked the owners to convert them into freehold.

Times of India, New Delhi, 05-05-2012

Walia Offers Some Cold Comfort

A day after TOI reported on the recent Delhi government circular banning transfer of property on the basis of a general power of attorney (GPA) and agreement to sell, revenue minister A K Walia tried to play down the fallout. Government officials, however, admitted that all transactions based on GPA and agreement to sell after the October 11,2011,Supreme Court order would be affected. Said a senior official, Transactions made after the court order will require regularization. These would need to be re-registered in the form of a proper sale deed now. This is especially true of those trying to sell leasehold property. Before the order, a GPA combined with an agreement to sell was seen as a legal transaction of ownership. However, now, any transactions using GPA as an instrument along with the agreement to sell will be seen as null and void. These transactions will need to be registered through a proper sale deed.
The problem, say experts, is that a large part of the transactions affected would have been of properties that don't have clear transfer rights. A revenue department official said, For instance, a leasehold property will need to be converted into freehold before it can be transferred through a sale deed. That may affect many transactions made after October 2011. The Delhi government circular will especially affect plotted development, added officials. The plots with three floors and below will need a clear title before they can be transferred. Since most of such properties are on DDA land, it means that conversion to freehold will have to be done prior to selling the property, said the official. Officials say the order is expected to plug the hole created by the GPA process, prevalent in property transactions in Delhi till date. Revenue was being lost through GPA-based sales, which largely involved sale of properties that was not legally allowed. Black money in property transactions and the massive litigation and criminalisation of property was becoming the norm as there was no proper title trail with the government, explained the official. The insistence on a sale deed now is expected to check black money in property transactions. It will impact some genuine buyers who don't have clear transfer rights, but in the long run, it will help the state increase revenue earning, sad the official.
Walia, however, made things sound very simple at a press conference called on Friday noon. He said the order will not have any effect on those who indulged in GPA-based sale before the apex court order came into effect. Those who had registered their property on the basis of GPA before the order came into effect can continue to sell and purchase it through the same process, said Walia. He added that for those who have used GPA after the apex court order can go to the sub-registrars office with their papers and get them registered by paying the required stamp duty. Walia evaded questions like why it took government seven months to come out with orders when the court had asked for the steps in October last year. He also did not give any definitive answer when it was pointed out that continued registration of property based on GPA for the past eight months may amount to contempt of court. We are trying to check the problem in future. For the rest, we will conduct a study.

Times of India, New Delhi, 05-05-2012

Times of India, New Delhi, 05-05-2012

Pay Stamp Duty to Regularise GPA Deal

The Delhi government on Friday clarified that all transactions carried out before October 2011 through "general power of attorney (GPA), agreement to sell and will" would not be affected in any way.
The Supreme Court had on October 11 last year banned registration of sale deeds of property transactions carried out through GPA transfer.

The government also said people who had registered their properties through GPA after October 11, 2011, can get them regularised by paying a six per cent stamp duty in case of men and 4 per cent for women.

Henceforth, GPA will be allowed only for transfer of custody, maintenance and authorised use of the property and not to effect any change in title.

Revenue Minister AK Walia said restrictions were put on GPA as a mode of property transfer after the apex court order. But such transactions still take place because of which an advisory was issued to all officers concerned last week.

"The advisory was issued to ensure total compliance of the Supreme Court order," said Walia. The court had ruled that sale transactions carried out in GPA would have no legal sanctity and immovable property can be sold or transferred only through registered deeds.

Divisional Commissioner Vijay Dev said property transaction through GPA had come down sharply after the Supreme Court order. "In April, out of 8,743 transactions only 1,264 were carried out through GPA. We collected revenue of R145 crore from property transaction through sale deeds. Only R6 crore were collected from transactions through GPA in April," said Dev. "GPA holders will not be able to transfer the property unless it is agreed upon by the owner. The sale deeds will be executed provided the owner agrees and the amount of transaction is credited in the name of the owner," added Walia.

Hindustan Times, New Delhi, 05-05-2012