A seemingly overlooked tweak to the Information Technology Act, 2000, carried out in September by the ministry of electronics and information technology (MeiTY) may help unlock digitisation opportunities in the real estate and financial sectors, industry experts said.
This is in context to a change in First Schedule of the Act which has provisions that govern which transactions can be done online and which documentations are valid online.
For instance, earlier the First Schedule laid down that documents related to properties do not come under the purview of the IT Act, which meant that it was not a valid digital document.
Other than documents related to the sale or conveyance of properties, documents that did not fall under the purview of the Act included a power of attorney, a will, and so on.
“These exclusions have been so far seen to be high-risk and, for them, parties must use paper records. So, for example, if a law requires these to be ‘in writing’, to be signed or filed to a government authority, parties can only meet these requirements using paper records and traditional ‘ink’ signatures,” NASSCOM’s public policy manager Varun Sen Bahl said.
NASSCOM is the body that represents the country’s IT and information technology-enabled services industry.
However, now, under the amendments notified in September, the government has omitted the property documents provision entirely, opening up digitisation opportunities in the financial and real estate sector.
“The deletion of contracts for sale or conveyance of immoveable property from the First Schedule to the IT Act assumes importance given its implication that real-estate transactions can now be executed electronically,” lawyers from legal firm JSA said in a blog post on Lexology.
Other documents and transactions that were not valid earlier online, and which the amendment now allows, include demand promissory notes (DPNs) issued in favour of banks, housing finance companies, etc; bills of exchange endorsed by financial sector participants; and power of attorney that empower financial stakeholders to act on behalf of a person.
The opportunities
NASSCOM said that if state government laws such as stamp duty and registration charges are also amended, it will now be possible to make all property transactions paperless.
“Since the IT Act is not in the way, state governments can rely on its provisions to also take stamping, registration and property transactions fully online. This can reduce administrative costs in real estate and in land record offices,” the industry body said.
It added that the amendment may boost land records modernisation programmes and other property-related initiatives that governments have taken up from time to time.
“Some state governments are also running online platforms for electronic execution of agreements. These may be easier to build and scale now from a legal standpoint, through digital title deeds or sale agreements, which may now be maintained as valid land records,” NASSCOM added.
In the financial sector, experts feel that it would be easier for lenders to disburse loans electronically because the amendments now allow online creation of promissory notes, power of attorney, and so on.
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