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 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 at the convenience of the 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.
A brief glimpse at the process involved for property acquisition in India:-
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 apply to 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, any convey any ownership right or title of the property to the guarantor.