SC's GPA judgement is seen as a landmark order which will go a long way in reducing the illnesses that prevail in the realty sector.
“Transfer of immoveable property by way of sale can only be by a deed of conveyance (sale deed). In the absence of a deed of conveyance (duly stamped and registered as required by law), no right, title or interest in an immoveable property can be transferred,” the Judge ruled in a Supreme Court judgement sometime back and with this announcement, he also probably sounded the death knell on a lot of illegal activities happening in the realty sector.
The Judgement is very specifically aimed at the method of “GPA” type of property sales, which has been used by buyers and sellers to not only avoid showing who the actual owner is, but also to evade stamp duties, which become payable if the property is registered. This method has also been used to avoid capital gains tax and as a means to convert black money into white money. Although, the new judgement may not completely stop the practice, it is seen as a landmark order which will go a long way in reducing the illnesses that prevail in the realty sector.
The Mis-use and Abuse of the GPA
The General Power of Attorney has been around for a long time as a facilitator of transactions when one of the parties cannot be physically present and nominates a third person to execute transactions on their behalf. It has also been an excellent and efficient tool to allow land owners and promoters to build and sell properties.
However, the GPoA or GPA as it is called has been used by individuals and unscrupulous entities to not only cheat the government but genuine buyers/sellers too.
How buyers were affected
The most blatant misuse of the GPA was of GPA holders selling the same property to multiple buyers. As there was no way of finding the correct ownership pattern in the absence of registered deeds, the holders of GPA played truant with many an unsuspecting buyer.
How sellers were affected
Many times, individuals who are abroad or physically unavailable for transactions have entrusted their properties to “friends” or “brokers” by way of a GPA. However, with the sky rocketing of land and real estate prices, there have been several instances where greed took over some of the so called friends who sold off such properties and vanished with the earnings.
How the government was affected
The most evident way in which the Government and local bodies have been affected is by means of tax avoidance. The second aspect has been in selling off properties, which have a lock-in period defined by the government, for example slum redevelopment projects in which, the flat owners cannot sell the property for a specified period of time.
How black money has been routed?
Since the GPA sales process does not involve any kind of registration of transactions, it is easy for people to channelize their black money into real estate. They execute transactions using a GPA and get away without having to show the source of finance for such transactions as neither the land authorities nor the tax department has any inkling on such transactions.
The impact of the judgment
On existing buyers
On the Government and Local authorities
On Builders and Promoters
What should you do?
If you or anyone you know has brought a property from someone holding a GPA, get it registered right away. Those of you who have given a POA to someone else can sleep more peacefully as the chances of the POA being misused have now been reduced drastically. The Power is still with you!
BankBazaar.com is an online marketplace where you can instantly get the lowest loan rates , compare and apply online for your personal loan, home loan , car loan and credit card from India's leading banks and NBFCs.
READ MORE ON immoveable property, General Power of Attorney, real estate, Supreme Court, black money, Transforming India
ADS BY GOOGLE
Ask the Experts
Get your Personal Finance queries answered