Many people purchase real estate through the General Power of Attorney or GPA. It is a transaction style that has been followed in the Indian property market for several years now. The key thing to remember is that the Supreme Court of India has already issued an order in 2011, stating that property transfers via GPA are not legally valid. Here are some other helpful aspects that you should not forget.
What does the GPA mean and how is it used?
The GPA is the power given by any individual to any person to undertake particular legal or financial business on his/her behalf. It is a common style of property acquisitions where original owners or buyers are unable to physically attend, like those with disabilities or NRIs (non-resident Indians). GPAs are hence given to trustworthy and reliable individuals who can transact on their behalf.
GPAs are used for the management of property-linked issues for owners, finance management for the principal (the one giving the GPA), management of medical affairs, and carrying out the as and what as stated in the GPA deed.
Does the GPA require registration?
The GPA (General Power of Attorney) should be registered at the office of the SRO (Sub-Registrar Office) to be valid. However, it is only valid for the principal’s lifetime and may be revoked anytime by him/her as well.
Here is the registration process:
• The GPA has to be made on the stamp paper.
• The principal owner and GPA holder should visit the SRO office at the appointed time.
• All documents like the ownership papers of property and residence and identity proof should be submitted.
• Two witnesses should also be present with their identity and residence proof documents.
• Every person should provide two passport-sized photographs.
How GPA works out in the real estate sector
The GPA route is not recommended in most cases for buying property. It is true that charges like capital gains tax of the seller and stamp duty and registration of the buyer can be avoided through the GPA. Yet, this is not a good way to purchase real estate. GPA holders will not have authorization to sell properties on the owner’s behalf despite the registration at the SRO. This is because of the 2011 Supreme Court judgment that made it invalid. The GPA holder can only execute tasks assigned by the owner with the exception of the sale of the property.
The only exception for buying a property through GPA is when the holder has obtained what lawyers call irrevocable power against consideration. However, in this scenario as well, the holder should have substantive right in the property in question, through the agreement to sale or any similar legal document. This power should also be registered in this manner with interest that stays valid post the grantor’s death.
GPAs lapse upon the guarantor’s death and are sometimes not registered. The law only recognizes irrevocable powers of the holder in case they are combined with a specific interest. Hence, you should avoid buying property through a GPA.
What if you have already invested in property through a GPA?
If someone has purchased a property via a GPA, then he/she will not be the property’s legal owner. This is because of the absence of a registered sale deed for the property. Without this, you will not be able to sell the property as well. Banks also avoid financing projects that involve transactions through GPAs.
