Selling a property

Can You Sell a Property Through GPA?

It is not uncommon to hear about real estate transactions being done through the general power of attorney (GPA). In fact, many buyers got duped with this nature of transactions. However, did you know that any sale of property through GPA is illegal? Yes, you read it right!

Investment in real estate is probably the most expensive investment of your life. Thus, its good to know all the rules and regulations.

What is general power of attorney?

A general power of attorney is a right given by the principal to his agent to carry out certain financial and legal transactions on his /her behalf. This sort of arrangement is generally used when the principal is based abroad or does not have the wherewithal to carry out the transactions on their own. This could either be due to illness, work commitments, old age, residing abroad, etc.

There are two kinds of power of attorneys:

  • General power of attorney: This gives the agent the broad powers to act on behalf of the principal in all sorts of transactions.
  • Special power of attorney: This kind of PoA is restricted to one specific or special type of a transaction.

Any power of attorney is valid only during the lifetime of the principal, or till such time it is revoked by the principal. A GPA will be considered valid only when it is registered at the sub-registrar’s office.

Why is the sale of property through GPA illegal?

A transfer of any property through sale involves payment of registration and stamp duty by the buyer, which could range between 5-10% of the value of the property, depending on the state rules.  Also, the seller needs to pay income tax on the capital gains.

Sale through GPA had become a widespread practice as it allowed evasion of all the duties mentioned above and taxes.  Furthermore, sale through GPA allowed the sale of even those properties which were not held by the sellers or did not have clear titles. On the buyer front, it allowed them to buy at a lower price.

Sale through GPA also allowed the sale of properties that needed specific periods of gestation (like properties bought from the government ) well before the end of the period.

Taking into account all these issues, the Supreme Court of India passed an order making all property buy/sell transactions with a GPA illegal. Following this order, all states introduced a ban on property transactions on GPA.

However, in 2012, the Delhi Government allowed GPA registration in favour of spouses and other immediate family members like children or siblings, or even relatives.

What if you still try to buy a property sold on GPA?

If you still go ahead and buy a property sold through GPA, the transaction will not be considered valid, and you will not get the clear title to the property, which will make any further transaction of the property impossible for you in a legal fashion.

Secondly, banks or financial institutions do not lend for properties being bought in such a fashion.

Buying or selling of a property is a considerable investment and a responsibility. Doing it in a legal way will save you from unnecessary hassles at a later date.

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