A power of attorney is an instrument by which a person is authorized to act as an agent of the person granting it. It is important to know a person need not be a lawyer to hold a Power of Attorney as an agent for someone else. This article looks at the status of General Power of Attorney in India and how it can be used to buy real estate in the country.
A General Power of Attorney grants all the powers to the person wherein he/she will be answerable as well as accountable to all the acts done/decided by him on behalf of the principal person. In India, it is not quite uncommon in the real estate sector to use a general power of attorney for all kind of property matters and transactions i.e. buying, selling, mortgaging, leasing etc. The most significant thing to consider is choosing the right and reliable person while handing him over your general power of attorney. Here, the key emphasis is on the use of General Power of Attorney for buying of property and how effectively appropriate it is in the eyes of law as well as in reality for the principal.
General Power of Attorney, is used by buyers and sellers only to avoid stamp duty, capital gains, taxes, etc. and especially, in cases, where the principal owner is out of town or country and thus, issue a general power of attorney to a trustworthy person to do certain acts relating to purchase of property on behalf of him.
Another benefit is that General Power of Attorney is revocable or terminated at the grantor’s desire at any apt time he/she thinks right unless it is made otherwise. In other words, it is only for the convenience of buyer, but in any way does not convey ownership of any purchased property to the attorney/principal person.
Here, the important thing to note is that power of attorney should not be considered as a transfer instrument of any title, right or interest in any property.
There are more cons to the use of General Power of Attorney than pros as its issuance involves significant risks and uncertainties.
The attorney may turn out to be unreliable and can abuse the powers granted to him.
The drafting of General Power of Attorney has to be made with great care and precision, where valid reasons for issuing the powers have to be stated. Any wrong use of words can jeopardize your position and can cause greater harm.
General Power of Attorney is not a valid document for transfer or purchase of immovable property in the eyes of law.
A brief glimpse at the process involved for property acquisition in India:-
First, examine the relevant details of property-to purchase, i.e. area of property, its freehold status, details of the past owner(s) etc. and compare it with details prescribed in the title deed to verify the examination.
In case, the construction of property is to take place, then evaluate given property designs, layouts and builder plans and the given approvals for the same by the respective authorities.
Perform a thorough title search of the property.
Get the encumbrance certificate from the previous owner to assure the clear title of the property.
Ensure the payment of all past taxes and bills by the previous owners
Hire the services of real estate lawyer/expert and get a rightfully drafted sale agreement and conveyance deed on the stamp paper of the prescribed amount.
The final agreement to be signed by both the parties to purchase and by minimum 2 witnesses.
Finally get the property and conveyance deed registered in the name of the buyer after paying the requisite stamp duty.
A Non Resident Indian can buy any number of immovable properties in India except agricultural land/farm house/plantation property and its purchase payment has to be made via prescribed channels.
A Non Resident Indian can issue a General Power of Attorney to a person in India which has to be adequately signed on each page and has to be attested by the Indian embassy situated in its residing country. Send the original attested General Power of Attorney by courier to his Indian attorney. The said document has to be presented before the District Collector for stamping and then it is to be registered, as per the respective State Act, where the Non Resident Indian desires to purchase immovable property.
The Apex Court of India has clearly pronounced that sale of immovable property via General Power of Attorney is not valid as it does not convey any ownership right in respect of the purchased property in favor of the buyer. It can be made only by way of stamped and registered conveyance deed as applicable under the respective State Act. Hence, Property Acquisition via GPA is not valid under Indian Law. GPA just authorizes the grantee to do some specific acts on behalf of the grantor and does not complete any transaction relating to sale/ transfer of immovable property.
In a nutshell, the General Power of Attorney is just a authority document issued by the Guarantor to Grantee to perform certain acts on his behalf and is also required to be registered as per respective state provisions but convey any ownership right or title of the property to the guarantor.