A Complete Guide to GPA for Property - Is it Safe to Buy? GPA for Property Rules in India

What is a Power of Attorney?

An essential legal document known as a power of attorney (POA) permits an individual to choose another person or organization to manage their finances, health care decisions, and property (Power of attorney for the property) while they are away. In this arrangement, the person who grants the other person the power to act on their behalf is the primary donor or grantor. In essence, a person grants another person the authority to act as his agent and to carry out particular tasks on his behalf. 

Non-resident Indians (NRIs) frequently use this tool as they might be unable to travel back to their home country at a particular time due to their professional or personal commitments. A POA is useful for busy people, such as businessmen and those unable to undertake numerous personal and professional obligations, because of its convenience. There are two major powers of attorney for property: special power of attorney and general power of attorney, also known as GPA for the sale of the property.

General Power of Attorney or GPA For Property Explained

General power of attorney (GPA) gives an agent the authority to carry out normal tasks on behalf of the principal. 

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GPA talks about a wide range of powers granted to a representative. Suppose you give someone a GPA for a property. In that case, they can function as your agent and pay your bills, collect rent for you, handle and resolve conflicts, or handle all of your bank business, according to Supreme Court attorney Himanshu Yadav. This lasts for a defined period. This facility grants the PoA agent the ability to make personal and professional judgments. Residents also opt for home loans for GPA property in Delhi.

This only applies to a particular duty and lasts for a defined period. This facility grants the PoA agent the ability to make personal and professional judgments.

What is a Special Power of Attorney?

A special power of attorney is when a person gives a lawyer specific authority to act on their behalf. The scope of the decision-making process or the choices that may be made are constrained by special powers of attorney. For instance, a customized power of attorney could be provided solely for selling a particular residence or making medical choices. A special power of attorney must be signed for it to be effective. This form will contain information from both parties, such as the attorney's certification, and will outline the specific powers granted to the attorney.

Real Estate and Power of Attorney

The foregoing shows that a POA is an invalid document for transferring a property title. However, because of the financial advantages, it provided, issuing a GPA for the sale of the property had become a regular practice in India. 

Property titles are often transferred through the execution of a sale deed, after which the buyer must pay registration fees and stamp duty. The seller must face the burden of the capital gains tax that was applied to the transaction. 

According to the law, agricultural land cannot be sold for residential use without changing its intended use through a conversion. Most landowners sell their property through the GPA for property instead of going through the formalities of conversion. Other legal restrictions may also force the owner to choose GPA for property sale in India. 

Most government housing programs are supported by a gestation period that prevents customers from reselling the home to a third party for a predetermined time. Using the accounted fund, the GPA was seen as a vehicle for real estate investment. Family members occasionally appoint general powers of attorney to grant property rights. Frequently, a childish person invests in real estate without considering the risk of doing so being illegal.

How was GPA for Property Selling in India Misused?

By signing an agreement to sell and a will in favor of the buyer with the GPA and handing over possession of the property for an undisclosed sale value, purchasers and sellers frequently abuse GPAs to avoid paying stamp duty, capital gains taxes, and other fees.

Case Study of Suraj Lamp Industries 

The Supreme Court declared in Suraj Lamp & Industries Pvt Limited v. State of Haryana that property transactions made through a Power of Attorney were not legitimate under the law in its 2011 decision. 

According to a three-judge panel led by justice RV Raveendran, "A PoA is not an instrument of transfer regarding any right, title, or interest in an immovable property," adding that the only way to transfer property legally is through a registered sale deed. 

It was decided that the validity of sale agreements and Powers of Attorney (PoAs) signed in genuine transactions would not be impacted by the verdict, which was reached after interpreting several aspects of the legislation relating to GPA for property and became applicable retroactively.

While declaring that municipal entities should not consider mutation requests for properties that have undergone power of attorney, it was clear that the judgment should not create any changes to already-existing records. The Delhi government issued a circular in 2012 prohibiting the transfer of property through a GPA for selling property in India, a will, and an agreement to sell jointly or singly in response to the Supreme Court's decision.

What did the Supreme Court Say: Key Points

1) Municipal entities were strongly urged not to go for GPA for registration of property as the primary document. A power of attorney shall be void if used to transfer real property, per the court's order. The court's decision states this is not the case for real transactions. 

2) Parties were not prevented from obtaining registered deeds to complete the title. The transaction mentioned above may be used to support possession per Section 53A of the Transfer of Property Act. 

3) The decree forbade states from using GPA for the registration of property. The court's ruling will impede the flow of illicit funds into the shady real estate market, where titles are frequently falsified. Several real estate transactions where prices have been pre-determined will also be impacted.

4) The Government of Delhi now permits registration in favor of family members and any other relative of the trust by registered owners after enacting a broad ban in 2012.

Power of Attorney Registration

A PoA must be registered, according to the SC, if it is signed for the sale of real estate. Also, remember that a notarised Power of Attorney would be admissible as evidence in court.

Why Should You Avoid the GPA Format for the Sale of Property?

The supreme court stated that the GPA procedure makes it possible to systematically avoid paying taxes on income, wealth, stamps, and registrations. Additionally, it contests the advantages of such revenue for the populace and the government. 

Second, selling property through GPA transactions makes it easier for people with a hidden income to invest their cash and make money. Thirdly, the growth of the real estate mafia and unlawful transactions result from sales made through GPA. 

Therefore, it is evident that a deed of conveyance is an absolute requirement when transferring property by way of a sale. As a buyer, a purchase of the property would be beneficial only if you can legally possess that piece of property and register it under your name. It is also beneficial to consider other factors outside the item's cost. 

What if you used GPA to buy a property?

Despite being in "ownership" of the property, you are not its legal owner if there is no registered sale document. It would be nearly impossible to perform the transfer without going for the sale of property through GPA, extending the illegal line of conduct in the absence of clear property tiles. 

After receiving GPA for the property, the representative is immediately responsible for overseeing the owner's estate and taking care of fundamental obligations, such as paying loans and energy bills. A broad power of attorney can also permit an attorney to change the property. A property with a recorded sale deed would only be considered valid legally. Because it won't give such a transaction any legal effect, the GPA for property in this situation is somewhat constrained. It is certainly a positive development that the court has ordered property owners to refrain from GPA for property sales in India. It will aid in preventing illegal trade practices for real estate transactions. Please comment below this article if you need any help regarding real estate laws in India and wish to consult experts at NoBroker. Our finance, real estate, and tax experts will address any concerns that you may have regarding property taxation. 

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