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Direct Transfer of Under Construction Property

Transfer of Under Construction Property
Transfer of Under Construction Property

Transfer of Under Construction Property is one of the most complex topics in real estate. It is situational and there are no right or wrong answers. Transfer of Under Construction Property depends on multiple factors like Construction Status, Home Loan of a Seller, Builder or Landowner share etc. The buyer is in a dilemma on how to make payment and what is the right procedure to execute the deal. The situation is complex if the occupancy or completion certificate is issued, but the property is yet to be registered. Another confusion is who will bear the cost of VAT and Service Tax i.e. buyer or a Seller. In my post, Buy Resale Under Construction Property i tried to explain all the imp points which a buyer should take care at the time of Transfer of Under Construction Property. The right and the best way, which is being followed for Transfer of Under Construction Property is through tri-party transfer deed or assignment deed. As i explained that this deed is signed by the buyer, the seller and the builder as a confirming party.

This post is dedicated to new form of transfer i.e. bi-party transfer of Under Construction Property which is executed between the buyer and a seller. It is also known as Direct Transfer of Under Construction Property. In short, the builder is not a party to transfer or assignment deed. This mode of Transfer of Under Construction Property started from Maharashtra and now i am getting cases from other states like UP, Delhi, Haryana etc. In my opinion, this is not a fool-proof or a legally correct way to transfer the under construction property. Unfortunately, builders are not willing to cooperate with the seller. It’s a completely hassle free and convenient process for the builder. At the same time, Direct Transfer of Under Construction Property is riskier for buyer compared to tri-party transfer or assignment deed. First let’s understand how it works.

Direct Transfer of Under Construction Property – How it works?

1. Seller finds a new buyer for under construction property.

2. Seller approach builder for Transfer of Under Construction Property.

3, Builder issue NOC to seller mentioning that he does not have any objection in Transfer of Under Construction Property to the new buyer. I will write a separate post on imp points to be mentioned in NOC issued by the builder.

4. Based on builder’s NOC, Seller and Buyer execute Sale Agreement or Transfer Deed.

5. Seller submits this sale agreement with the builder.

6. Based on Sale Agreement, builder transfer allotment in the name of a new buyer in his records. In some cases, on demand of buyers home loan provider, builder endorse the sale agreement between the seller and the buyer.

Now this process is full of loopholes. NOC part, i will cover in my one of the future post which will be dedicated to NOC issued by the builder. Let’s check why a buyer should not agree to this process.

Direct Transfer of Under Construction Property

 1. Legal Transfer of Property Title: There is confusion between various govt departments on the transfer of property title. At a macro level, there is a supreme court ruling on the same subject. A property title can only be transferred through conveyance deed which is registered in Sub-Registrar office. This conveyance deed can only be executed when the property is constructed and ready for possession. In short, for under construction property the title of the property rests with the builder or landowner till Sale Deed or Conveyance deed is not executed in the favour of a buyer.

The contrary view is the ruling of income tax department. It states that for calculation of capital gain, date of allotment of under construction property will be considered as Date of acquisition. It implies that buyer vest the property title from Date of Allotment of under construction property.

I will go by the ruling of Supreme Court of India in this regard. Therefore, if buyer signs the transfer or assignment deed only with the seller then it is legally null and void. Reason being, property title is still not transferred to the seller by the builder. Subsequently, the seller is not authorized to transfer his rights or interest in a property to a buyer and only the builder can do so. In Direct Transfer of Under Construction Property, there is no agreement between buyer and the builder. The entire transaction is based on NOC issued by the builder.

2. High-Risk Transaction: As i mentioned that direct transfer of Under Construction Property is High-Risk transaction. To share an example, the entire transaction rests on builder NOC and seller always insist on direct payment from a buyer to seller. Recently, i came across a case in which seller got 3 NOC’s issued for the Transfer of Under Construction Property. He took money from all 3 buyers and is now absconding. As a buyer, you cannot ensure that NOC issued by the builder is the lone NOC and there is NO intent of financial fraud. This is one of the examples and there can be multiple possibilities of financial fraud.

3. Enforcement of Agreement: Assuming i bought a property from person A through Direct Transfer of Under Construction Property. We mutually agreed upon certain terms and conditions which we included in our bi-party agreement. Now tomorrow builder may refuse to accept these legal clauses as he is not a party to the agreement. Therefore, Sale Agreement or Assignment Deed signed between the seller and the buyer is legally not enforceable. Moreover, all the details like payment status etc in the agreement will be based on seller’s declaration. In future builder can always dispute any specific clause in the agreement. In case of landowner’s share, a buyer may land in a bigger trouble as total 5-6 parties are involved depending on the case to case basis.

4. Financial Implication: Lastly, any direct transfer of Under Construction Property can have a financial implication for the buyer. In such cases, i have observed that builder may put across illegitimate financial demands from the buyer. If buyer protest, the builder has a simple reply that he discussed these charges with the seller. Moreover, builder NOC does not mention anything on payment front therefore it is important that buyer should involve builder in the property transaction.

Concluding Remarks: To safeguard buyer’s interest in property transactions, It is advisable to enter into a tri-party agreement / assignment deed / transfer deed. It is the responsibility of a seller to convince builder. As a buyer, there is no compulsion or force to enter into an agreement. It is seller’s problem and by entering into a direct transfer of under construction property the buyer is risking his hard earned money. If buyer’s will not agree for direct transfer of Under Construction Property then builder’s will be forced to change the process.

Copyright © Nitin Bhatia. All Rights Reserved.

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Abhishek Kundu
Abhishek Kundu
8 years ago

Hello Nitin sir, 

 Sir i am planning to buy a plot of 191 sq. Yard in delhi and has selected one. It is a under construction plot with structure upto 2 storey and it can go upto 4 storey. The construction has stopped due lack of liquidity of d builder.Also it has b basement and ground level parking area. We are 4 friends in a mood to buy dis plot and construct it fully and divide floors between us. How it can be done? Do we need to pay registration charges two times? One at buying of plot and second at dividing of floors? Please help

And what are the factors should we consider to safeguard our hard earned money in dis deal? 

And d seller is a company who owns this plot. Construction has stopped 1-2 years ago.

Plot is dda alotted and is authorised plot. Company has map of floors and passed by the Mcd and dda.

What kind of papers do we need to check before buying.

And what is the process of transferring the plot to us.

 Please help.

Waiting for your reply.

Regards 

Abhishek

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Abhishek Kundu

You can do that but subject to certain conditions. I can answer rest of the queries only after going through documents.

Sandip
Sandip
8 years ago

Flat I bought from the promoter was an under construction property which I wanted to sell and written ‘Please find my consent to sell the flat’ in an e-mail to the promoter without any proposal or price on the e-mail. Flat was sold by the promoter and mentioned the price on the e-mail. No tri party agreement was signed neither the promoter took a written letter or signature on any document from me. Even I am holding the sale agreement. Now the promoter says he will give me only 35% of the difference amount on sale as the property was under construction and payment was done only 35%. It is a financial fraud wherein he didn’t pay me the full amount and neither he got the document signed from me but sold the flat. Please advise .

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Sandip

I have not seen the documents therefore cannot comment but it seems to be financial fraud. You may approach a local property lawyer for future course of action.

Sagar Karale
Sagar Karale
8 years ago

Hello Nitin,

I have a property under construction and want to sell it. I entered into agreement with builder in November 2014. Now with buyer, i should get into bi-party agreement or tri-party? Also is the stamp duty payable by buyer is only on differential amount between my agreement value with builder and my agreement value with buyer? The property is in Pune, Maharashtra.

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Sagar Karale

It will be tri-party agreement. Stamp duty depends on the amount at which the builder will register the property.

Sagar Karale
Sagar Karale
8 years ago
Reply to  Nitin Bhatia

Thanks. My builder is saying i can only sell after possession. Is there any law which i can tell him under which i can sell the under construction property? As i have almost paid 90% amount i should have right to resale.

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  Sagar Karale

Though there is no such restriction but you need to check your agreement with the builder. In some cases i observed that builder put such restrictions in agreement.

rajiv batra
rajiv batra
8 years ago

I have purchased a property of RS92 laks,on 17.08.2015, sellers are co-owner, i forget to deduct TDS and paid amount by chq to both owner of 46 laks each, one seller have clear the chq, and other chq is not yet clear, registry of property is executed in my name and no TDS details have been made in the registry, Now can i file TDS , and can i deduct TDS from 2nd seller of Property by replacing of Chq

subramaniam
subramaniam
8 years ago

Hello Nitin

I had booked a flat and registered with the Builder during 2008.
The block pertains to me has come up and delayed.
The builder says he can provide me house in another block.
Can i accept it,
The builder might be providing the house to me from another buyer who had booked and offered to sell to the builder since it was getting delay and would have got his money back.
In this case, what needs to be checked

Nitin Bhatia
Nitin Bhatia
8 years ago
Reply to  subramaniam

You may obtain title certificate from local lawyer before making this switch.

nishant khandelwal
nishant khandelwal
8 years ago

I have purchased a flat in resale through a broker. the possession letter is already issue for the flat and flat is not transferred to my name as my bank is seeking for an endorsement NOC from builder. Ans builder is not giving the NOC. He is saying the list of flat owners is sent to authority for registry purposes.

What should I do in this case ?
How should I proceed to transfer the flat to my name ?
Also what should be the content in the NOC if builder asks for the same ?

Nitin Bhatia
Nitin Bhatia
8 years ago

Sorry i could not understand your query. I don’t understand the correlation between NOC and registry. Secondly, to whom builder has sent the list of flat owners. The property registration is executed directly in sub registrar office.

Rahul Gada
Rahul Gada
7 years ago

Hello Sir,

My sister had booked flat in 2011 in Lodha Casa Rio project. We now want to transfer this flat to my name for transfer of loan purpose. But still property is under construction. Although we have received intimation for fit-out possession and pay all remaining amount. But OC of the building may take much more time and actual possession letter will also take lot of time. It is mentioned in the agreement that we cannot transfer property or sell property until possession is granted.

Please let us know if we can transfer within family

1) before fit out possession or
2) After fit out possession before actual possession (OC received) or
3) After complete actual possession.

I dont want to wait till 3rd point since i am in real need to transfer loan amount to my account which is not possible until transfer on my name.

Please suggest.

Thanks,
Rahul Gada

Nitin Bhatia
Nitin Bhatia
7 years ago
Reply to  Rahul Gada

It depends on the clause in the agreement. It is restrictive clause and you can challenge it in court of law.

Rohit
Rohit
7 years ago

Dear Nitin Sir,

I have bought a flat from seller for which, possession letter was already granted to seller by builder but registration was not done.
After charging transfer charges from seller, Builder has transferred the property in my name and given me the allotment letter in my name.

Now I need to register the flat. Seller purchased the flat from Builder paying amount ‘X’ which is less than the current circle rate (say ‘Y’) of that flat. And I purchased this un-registered flat from seller paying him amount ‘Z’ which is more than the circle rate ‘Y’. (i.e. X < Y < Z).
Now when I went to builder for submitting papers to apply for registration, he asked me to register it by circle rate 'Y' (he is not consider actual re-sale price 'Z'). But I believe, since I have paid seller amount 'Z', I should register my flat with the amount I paid.
Please suggest, if I should push builder to register my flat with amount 'Z'.

Thanks,
Rohit

Nitin Bhatia
Nitin Bhatia
7 years ago
Reply to  Rohit

Firstly if the seller has received possession i.e. possession letter is issued to the seller then seller cannot sell the property without registering it. Therefore, in my opinion this transaction is invalid.

Property can be registered at Y

Madhavi Akella
Madhavi Akella
7 years ago

Hello Nitin Sir,

I am an NRI and booked an under construction property 2 year back. The registration of the property is due in march next year. I am planning to sell it by doing a transfer with the consent of the builder for a fees. I will be signing a transfer deed with the buyer and the actual sale transaction will be between the buyer and the builder. So technically I am not the seller. What would be taxation rules and TDS on this transaction? The sale amount is >1cr INR. Please advice .

Thank you

Sam
Sam
7 years ago

Dear Mr Bhatia,

We were landowners & had entered into development agreement with the Developer which had a defined area coming to our share & a percentage of extra area if such is generated by developer, thus we were entitled to an excess area of 107 sqm, however the developer refused to give us the same, finally we went into arbitration & the developer agreed to allot the apartment of equivalent area in the name of 2 landowners who were also tenants as Permanent Alternate Accomodation in favour of the 2 landowners as nominees of the Claimants (i.e the landowners).

Now one of the land owner wishes to purchase the apartment, in this case how can the agreement be structured to avoid double incidence of Stamp Duty ??

Nitin Bhatia
Nitin Bhatia
7 years ago
Reply to  Sam

To answer this query, it is important to go through the agreements. I suggest to take help of a local lawyer.

Yashovardhan Chaubay
Yashovardhan Chaubay
7 years ago

Hello sir,
I have bought an under construction property from investor in Khandeshwar area , he has registered it at 27 lakhs and I have done at 42 lakhs. I have already paid Stamp duty and registration fees and part payment agreement is already done .
I am taking loan from lic hfl, the builder has given NOC but LIC has asked me a mortgage NOC from builder.
The builders gave me a mortgage NOC and it is written that around 2.25 lakhs is pending as per slab wise payment as 6 percentage is still remaining.
The LIC guy has told me that when the cheque will be issued, the above amount will be subtracted and as per demand , they willl release cheques to builder. The seller has agreed to this already.

Sir , am I safe here,
Also I would like to inform you that my lawyer has never mentioned anywhere in the agreement that this is a under construction property, he and lic officials told me that they don’t mentioned this is an under construction property when I buy from seller instead of builder

The final sale deed is still pending

Thanks.

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