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Before You Buy Your House

 

MUMBAILAWYER.IN



Guide to Sale and Purchase of Residential Flats in Mumbai

The process of buying or selling a residential flat in Mumbai involves various legal and financial considerations. Understanding the documentation and procedures involved can ensure a smooth and hassle-free transaction. This guide provides a detailed overview of the key steps and documents necessary for the sale and purchase of a residential flat in Mumbai.


1. Understanding the Basics

 

A. Sale Deed

A Sale Deed is the most crucial document in a property transaction. It is a legal document that signifies the transfer of ownership from the seller to the buyer. The Sale Deed must be registered with the Sub-Registrar’s office to make the transaction legally binding.

 B. Agreement to Sell

This is a preliminary document that outlines the terms and conditions agreed upon by both parties before the actual sale deed is executed. It includes details like the purchase price, payment schedule, possession date, and other relevant conditions.

 

2. Important Documents Required

 

A. Documents from the Seller

 

1. Title Deed: This document proves the seller’s ownership of the property. It is essential to verify that the Title Deed is clear and free from encumbrances.

2. Previous Sale Deeds: A chain of previous sale deeds may be required to establish a clear title.

3. Encumbrance Certificate: This certificate is proof that the property is free from any legal or financial liabilities. It can be obtained from the Sub-Registrar’s office.

4. Occupancy Certificate (OC): Issued by the municipal corporation, this certificate confirms that the building is ready for occupancy and adheres to all local laws.

5. Society Documents: Share Certificate from the housing society, society registration certificate, and NOC from the society indicating that there are no dues pending.

6. Property Tax Receipts: Ensure all property taxes are paid up to date.

7. Approved Building Plan: This document verifies that the construction of the building has been approved by the local authorities.


B. Documents from the Buyer

 

1. KYC Documents: PAN Card, Aadhaar Card, Passport, or any other government-issued identity proof.

2. Proof of Income: Salary slips, income tax returns, or bank statements.

3. Loan Sanction Letter: If the purchase is being financed by a bank or financial institution, a loan sanction letter will be required.

4. Payment Receipts: Proof of payments made, including earnest money, installments, etc.

 3. Procedure for Sale-Purchase of a Residential Flat


Step 1: Verification of Title

 

Before proceeding with the transaction, the buyer must verify the title of the property. This involves:

– Checking the Title Deed to ensure that the seller is the legal owner.

– Verifying that the property is free from any encumbrances, liens, or disputes.

– Ensuring that the property is not mortgaged or under any legal proceedings.


Step 2: Agreement to Sell

 

Once the title is verified, both parties should execute an Agreement to Sell. This document should include:

– Details of the parties involved (seller and buyer).

– Description of the property.

– Agreed-upon sale consideration (price).

– Payment terms and schedule.

– Possession date.

– Conditions precedent to sale.

– Penalties for default by either party.

This agreement is typically signed on non-judicial stamp paper and may be registered, though registration of the Agreement to Sell is not mandatory in Mumbai.


Step 3: Payment of Stamp Duty and Registration of Sale Deed


The Sale Deed is the final legal document that transfers the ownership of the property from the seller to the buyer. The steps involved are:

– Calculation of Stamp Duty: In Mumbai, Stamp Duty on property transactions is typically 5% of the market value of the property (subject to periodic changes by the government).

– Payment of Stamp Duty: The buyer is responsible for paying the Stamp Duty, which can be done online through the Maharashtra Government’s e-payment portal.

– Execution of Sale Deed: The Sale Deed must be drafted, signed by both parties, and witnessed by two individuals. It should detail the sale terms, the agreed price, and the transfer of ownership.

– Registration of Sale Deed: The Sale Deed must be registered with the Sub-Registrar of Assurances within four months of execution. Both parties must be present for the registration, along with the witnesses. The registration fee is generally 1% of the property value, subject to a maximum cap.


Step 4: Possession and Handover

 

Once the Sale Deed is registered, the seller hands over possession of the flat to the buyer. This process typically involves:

– Handing over the keys.

– Delivering all relevant documents, including the Occupancy Certificate, share certificates, and NOCs.

– Transferring utility connections (electricity, water, gas) to the buyer’s name.


Step 5: Transfer in Society Records

 

The final step involves transferring the ownership of the flat in the records of the housing society. This requires:

– Submission of an application to the society along with a copy of the registered Sale Deed, NOC from the seller, and KYC documents.

– Payment of transfer charges as prescribed by the society.

– Updating the share certificate with the buyer’s name.


4. Financial Aspects

 

 A. Stamp Duty

As mentioned, Stamp Duty is a significant expense borne by the buyer. The current rate in Mumbai is 5% Plus 1% Metro Cess of the property’s market value.

 B. Registration Fees

The registration fee for property transactions in Mumbai is 1% of the property’s market value, with a maximum cap that is periodically updated by the government.

 C. Capital Gains Tax

The seller may be liable to pay Capital Gains Tax on the profit earned from the sale. The rate of tax depends on whether the property was held for a short-term (less than 2 years) or long-term (more than 2 years).

 D. Loan Processing Fees

If the buyer is taking a home loan, processing fees are typically charged by the lender. This fee can range from 0.5% to 1% of the loan amount.


5. Due Diligence Tips for Buyers

 

– Legal Scrutiny: Hire a competent lawyer to scrutinize all documents before proceeding.

– Property Valuation: Get the property valued by a professional to ensure that the price quoted is in line with market rates.

– Loan Approval: Secure a home loan pre-approval to know your borrowing capacity before committing.

– Society Rules: Understand the rules and regulations of the housing society, including transfer charges, maintenance fees, and other obligations.


6. Due Diligence Tips for Sellers

 

– Clear Dues: Ensure all dues, including property taxes and maintenance charges, are cleared before the sale.

– Accurate Representation: Accurately represent the condition of the property and any issues that might affect the buyer.

– Timely Handover: Be prepared for timely handover of the property and all related documents.



Conclusion

 

The sale and purchase of a residential flat in Mumbai are governed by a well-defined legal framework, which ensures the protection of both buyers and sellers. By understanding the documentation required and following the correct procedures, you can ensure a smooth transaction. Whether you are a buyer or a seller, it is advisable to engage legal and financial professionals to assist in the process and safeguard your interests.

 

 

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