According to the ruling of Honorable Supreme Court of India, Property Registration is mandatory to transfer the title of the property through conveyance deed/sale deed. When my father bought first property in 1986, he skipped Property Registration. He bought a property through GPA (General Power Attorney). In those days, it was perfectly legal to transfer the property title through GPA and was common practice. There was always a hidden risk of a future dispute. The only reason for this arrangement was to save Property Registration Charges :). It was a revenue loss for the govt and secondly, the chances of legal disputes were very high. To stop these practices, the Supreme Court of India passed a historical judgment that Title of the Property can only be transferred through registered conveyance deed/sale deed.
From time to time, i share through my blog the ways and means to save money in a legitimate and ethical manner. In past, i shared a post on How to save stamp duty and Registration Charges?. I explained the concept of DOTOR or Deed of Transfer of Rights that is perfectly legal to execute. The readers want more savings during property registration. One of the reason is that property registration charges are very high in some states. It is as high as a double digit. Secondly, property registration charges are not included in Home Loan eligibility. The LTV of 80% is calculated on property value excluding property registration charges. In short, buyer bears the cost. Last but not the least and my favorite quote “A Rupee Saved is A Rupee Earned”. In this post, we will discuss four least known ways to save property registration charges.
Property Registration Charges – How to SAVE?
1. Appeal to Sub Registrar: With the meltdown of the real estate sector. The property prices are either stable or dropped. On the other hand, govt is prompt to revise Circle Rate / Govt Guidance Value / Ready Reckoner Rate every year. Stamp duty is one of the major source of revenue for local state govt. Because of this, in most parts of the metro cities or cities that have seen rapid growth, the market value of the property is less than circle rate. In such a situation, the property registration charges are payable on higher of two i.e. circle rate or market value. For example, if i am buying a property for 60 lacs and circle rate is 75 lacs. In this case, property registration charges are payable on 75 lacs. Assuming, total charges at 6% means additional outflow of Rs 90,000. The home loan provider or agents/brokers suggest the buyer to pay property registration charges and close the deal. Everyone has their vested interest.
Not many buyers are aware that under the state stamp act they can appeal to sub-registrar for determination of market value. The sale deed/conveyance deed will be kept pending without completing registration. The matter is referred to DC (valuation) or concerned authority for determination of the market value. In case, the concerned authority is convinced that market value is lower than circle rate. The buyer is allowed property registration at a lower value. Therefore, a buyer can save property registration charges.
2. Property Registration at UDS (Undivided Share): This option is available only for under construction property. Typically a buyer sign two agreements with the builder i.e. Sale Agreement and Construction Agreement. In layman terms, sale agreement is for UDS (Undivided Share) in property i.e. share of a buyer in the common area. It includes the price of land and cost of land development. For example, for a flat of 1000 sq ft super built up area. Assuming built up area is 750 and UDS is 250 sq ft. Considering property value is 30 lac. In this case, the builder will divide 30 lac in two parts i.e. sale agreement and construction agreement. The sale agreement for UDS of 250 sq ft will be at circle rate, or govt guidance value says 10 lac. Balance 20 lac will be included in construction agreement towards the cost of construction. The sale deed will be executed for UDS of 250 sq ft i.e. 10 lac. Therefore, the buyer will save property registration charges on 20 lacs towards the cost of construction. The construction agreement is normally executed on stamp paper of Rs 200. Just to add that in some states like Tamil Nadu, it is mandatory to register both sale agreement and construction agreement. This option is only possible in states where registration of construction agreement is not compulsory.
3. Discount on property registration charges for FEMALE buyers: States like Haryana and Delhi offer a discount of up to 2% on property registration charges in the case of joint/individual purchase by females. Here the word of caution is that you should not include a woman/usually wife just to save property registration charges. It is especially true in case you are availing a Home Loan, and the female buyer is housewife/non-earning. Reason being, in the case of joint ownership, a co-owner should be co-borrower. Therefore, by including co-owner, a non-earning female member will be guarantor/co-applicant of home loan. Just to save few thousand rupees, this kind of scenarios should be avoided.
4. Study local stamp act: Please note that property registration charges are a state subject. The rules vary from state to state. You should review the local stamp act or hire a professional who can help in this regard. Sometimes, state rules help you to save property registration charges. For example, most of my clients in Maharashtra are not aware that if you sell the property within one year of buying from a builder, then the property registration charges are applicable only to the net profit. For example, i bought a property worth 1.5 Cr in Maharashtra from a builder. I sell it within one year for 1.60 Cr. In this case, property registration charges are applicable only on 10 lac i.e. net profit from the transaction. In Maharashtra, If a person gifts the residential/commercial property to husband, wife, son, daughter, grandson, granddaughter or wife of deceased son, stamp duty is only Rs 200. Among all states, i find stamp act of Maharashtra very flexible and buyer friendly.
Word of Caution: All said and done. If you are availing home loan, then you should discuss property registration value with the home loan provider. Reason being PSU banks approve home loan only on registration value. For example, sale agreement value is 1 Cr. You are saving stamp duty and registering property at 70 lacs. In this case, some of the PSU banks will consider 70 lacs for fixing home loan eligibility. Max home loan eligibility is 80% of 70 lacs i.e. 56 lacs. Therefore, it is important to keep home loan provider in the loop to avoid any unpleasant surprises in future.
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I have
a small parcel of agriculture land which was brought 7 years ago and
registered at circle rate to save stamp duty at that time. Now the
market value of the property is less than
circle rate. I need the money badly so that I want to sell the land. The
buyer wants to buy the land and develop the land in to Plots. He
insisting to go for sale agreement with some advance amount and
Development Agreement cum GPA for balance amount. In order to avoid
registration charges by the buyer and capital gains tax for me (actually
I didn’t get any gain -at that time market value is high, now the
market value is less). I am not interested to keep any plots in the
developed land. the buyer promising to pay the balance amount after
selling those plots.
Please advice me in this regard is highly appreciated. is it legal
My personal opinion is not to sell at a loss. The best option is to enter into a joint development agreement with buyer as you will get good value after development. For example, if the buyer develop 100 plots then you may retain X no depending on current market value. This is my personal opinion.
I will not suggest the option shared by you as your money will be stuck for very long. If you are keen to sell then sell with a clause of upfront payment at the time of registration.
Hi Nitin,
Thank you for sharing the detailed information here on this article. I’m registering the property for 61 Lakhs. This is in Bangalore. ( BDA ). Can you tell me approximately what would be the cost of the Stamp Duty and other charges ( at the time of registration ) that I will have to bear in addition to this 61 Lakhs. The only reason I ask is I’ve been working really hard to save every penny of my earning to get to this. An Approximate number would definitely help me.
Stamp duty in Bangalore is 5.6% and registration charges are 1%. Therefore, if you register on full value then approx amount will be 4.02 lac.
Thanks so much.
Hello Nitin Ji,
During resale of a registered flat what is approx cost of (TM) Transfer of Ownership charges in NOIDA and who is expected to bear the cost buyer or seller?
Also any possible ways we can save money here
It can be borne either by the seller or by the buyer depending on the negotiation between 2 parties. For exact amount, you may check with the concerned authority.
Dear Nitin Ji,
Thanks for article. My query:
My father & mother co-owned a property in Noida, UP which was sold for 61 Lacs in May 2016. Now myself, my father & mother are buying a property in Delhi and registering it for an amount of Rs. 1.4 Cr. Any tips for me for saving registration/stamp/income tax in a legitimate way?
Through investment in this property, your parents can save long capital gain tax if the holding period was more than 36 months. In Delhi, there is a rebate in stamp duty and registration charges if the owner or co-owner is female. For more info, you can check my posts on stamp duty and registration charges.
Thanks!
Hello Nitin,
I am really admire your work in educating us and promptly getting back to our questions. Thank you for that.
We are buying a ready to move flat in Bangalore for 59 lakhs from Mr.X who has not registered the property but has got into a sale agreement with the builder. Now Mr.X is reselling the property to us for 59 lakhs and he has a SBI bank loan on this property. He is currently closing this bank loan by paying the pending amount around 15 lakhs to the bank and will be giving the closure letter before our sale agreement to us. I am also planning to go for a SBI Loan for 20 lakhs after sale agreement is done. But Mr.X owes some money to the builder around 12 lakhs.Now how do we go about the sale agreement? What are the key things we should put in the agreement so that we are not charged for any extra charges in the future.
Thanks in Advance!
You can sign tri-party agreement also known as assignment agreement between you, seller and the builder. You can pay 47L to the seller and 12L directly to the builder. The clauses and terms & conditions of agreement will depend on the nature of the deal.
Thanks Nitin.
Mr.X bought the flat when it was under construction and has paid taxes as part of the payment made to the builder. Now since we are registering the property for more than 50 lakhs , we will have to pay 1% TDS. Who do you think should pay the charges? We who are registering the property or will this be included in the taxes he has already paid for the builder?
Thanks in advance!
TDS of 1% will be applicable. You need to deduct 1% from 59L
Dear nitin,
Non-earning female member will be guarantor/co-applicant of home loan.
Sir, I have read your post regarding making female/wife co-applicant on a home loan. I have applied/talk for a home loan in most of the banks are instead on co-applicant without co-applicant they cannot finance. When I told them the co-applicant or female/wife is not earning what is the need of making co-applicant on home loans because it doesn’t make any sense, but they refuse, by saying that without co-applicant they cannot finance (bank like HDFC, PNB etc.). I have also written about these to RBI and got his reply below :-
“Please refer to your email dated May 10, 2016 on the captioned subject.
2. In this connection, the management of loan sanctioning / recovery activity, in a bank is essentially an internal management function and each bank’s Board is authorized to frame suitable policies. Banks have been advised to prepare a well-defined loan policy approved by their Board of Directors
With Regards
Department of Banking Regulation
Reserve Bank of India
Central Office Building
Shahid Bhagat Singh Marg
Mumbai 400 001”
And another socking point when I have gone for home loan to BOI, without looking to the documents they simply refuse by saying that you are not having salary account with our bank we cannot finance. What is the meaning of that, now the salaried person need to open a salary account in all banks if we want to take loan.
Your suggestion and reply to what do in above cases.
Thanks
Home loan approval is solely at the discretion of the bank. Bank cannot be forced. You may approach other banks/HFC’s who are willing to lend without co-borrower.
Dear Nitin,
I am buying a resale flat for 70L and the seller had registered it for 28L in 2014 which was the minimum rate at that time. Now the minimum rate is 30L. The seller wants me to register for 30L only and he needs the remaining amount as Cash.
My arrangements are as follows:
I am got my bank loan sanctioned for 50L and the bank says they will give 2 cheques, One 80% of 30L (ie 24L) and the second 50-24 = 26L. The second cheque will have an amenities contract to support for the same value. Both the cheques are in the seller name.
I am an NRI.
My query is 1) Will the seller have to pay tax for the amenities contract value of 26 L ?
2) I have to give cash 20L for the seller, If i withdraw the cash from my NRE account will there be any problem or questions or notice from tax authorities ?
1. Yes
2. It is illegal. Please check following post
https://www.nitinbhatia.in/real-estate/property-deal-cash-payment-black-money/
Hi Nitin, can you advise the cost associated with registration of sale agreement ( not sale deed) ? Is this something to be done only at sub-registrar office just to make that agreement valid in all purpose ? I heard notarized sale agreement is not valid in court.
You have not mentioned the state in which property is located. The notarized sale agreement is legally valid but in some states it is mandatory to register even the sale agreement like Maharashtra.
Thanks for the reply Nitin. My question was for Odisha state. I still want to know the cost associated with initial Land Sale agreement in Sub-Registrar office vs Notary. If there is not much difference between these two authority then why people mostly consider Notary than Sub-Registrar Office ?
Dual registration is a big hassle therefore buyers/sellers prefer notarization of sale agreement. Even if you register both sale agreement and sale deed. The total stamp value will remain the same. Any stamp duty paid at the time of registration will be adjusted against the stamp duty payable at the time of sale deed.
Personally, i will prefer registration of both sale agreement and the sale deed.
Hi Nitin,
Thanks for all your nice informative articles.
1. We are going to purchase a resale home in Thane. both me(applicant) and my husband(co-applicant) has applied for loan. Will we get any discount in registration fees?
2. Currently all my identity documents are with my before marriage name. Loan also applied with same name. Now in registration, I can register it with my new surname(after marriage)? Also which all document we would need to submit/create with this regard(any affidavit)?
Thanks!
1. In Maharashtra there is no concession or rebate on stamp duty or registration charges for female owner/co-owner.
2. Preferably you should change your name before property purchase. For name change, you need marriage certificate. Based on that you can get your name changed in PAN, Passport, Aadhaar, DL etc. You can also declare name change in the gazette notification published by the Maharashtra Govt every month and keep a copy of the same for your reference.
How much the stamp duty, I pay for mortgage loan of Rs 1,61,35,632/-
It varies from state to state as stamp duty is state subject.
Hi Nitin
Thanks for all your helpful posts.
My query is: I have invested in an under construction property without loan. Allotment letter: March 2016 Registered: Oct 2016. Possession: March 2018. I want to transfer this property to my Mother, as there is major contribution from her savings and her property, which was sold years back.
I dont know if a property can be gifted without having a possession. Also it would cost 2% stamp duty + registration charges and may also complicate in revoking the same, later.
In this article, you have mentioned,
“if you sell the property within one year of buying from a builder, then the property registration charges are applicable only to the net profit”.
So, can I sell this property to my Mother, by showing less/ no profit and save the stamp duty and reg. charges. I am the only heir.
Shall I need to consider anthing, which may cause any implications later?
By means of Will, could I own the property later, without paying extra stamp duty & registration charges.
Best Regards
Sesha
Personally i will not suggest to transfer in your mother’s name. It will be costly affair in long run with lot of hassles. You may find it difficult to sell the property if it is inherited.
Wish you Happy New Year Sir and Thank you very much for your suggestion.
Could the sell of the property be difficult, even if I am the only heir?
Thanks and wishing the same to you & your family. It is administrative hassle and costly affair. Besides that buyer may ask you the reason for all the past transfers that may not be easy to explain until and unless you have logical and valid reason for the same.
I work in SBI as a Manager. I want to buy a residential plot for house in Varanasi. I want to apply a home loan for land purchase and construction ( 40 lacs for land+10 lacs for construction) 50 lacs. But the real price of land is 30 lacs only. But bank will provide only 75% of land cost which is 22.5 lacs. Therefore I want to apply SBI home loan for ( 40 lacs for land+10 lacs for construction) 50 lacs. What are the positive and negative sides of this decision. Please reply me as soon as possible.
Being a LIC employee you received home loan at discounted rate that is good. I am assuming your EMI is not exceeding 50% of net income. For other general suggestions, you may check my posts on Home Loan.
Thank you for reply sir.. But the real price of land is 30 lacs only I want to show its price as 40 lacs in papers. Now tell me +ve and – ve sides of it.
I will not suggest. In future seller may demand additional 10 Lac from you and you cannot refuse or claim that deal was only for 30 Lac.
Thank you so much sir..
What is Service tax % for an under Construction flat. i have bought a flat in hyderabad which is under contruction and value of it is <50L. What would be the service tax for it, as of today they are charging me 4.5% where as when i checked in a article it should be 3.75%
Recently there was a change in abatement rate. Therefore, 4.5% is correct. I will update in my post.
Can GPA be executed to make joint property between 2 owners freehold and transfer it to either of owners and what would be cost implications for both the parties and how can cost be minimized.
As per ruling of Supreme Court of India, GPA is not a valid title transfer document. You can execute relinquishment deed or gift deed as the case may be.