It is quite surprising that, in some cases, banks insist on advances as part of a real estate agreement. Such cases are contrary to existing rules and regulations. In short, deliberately or unintentionally, banks put the buyer`s money at stake. In other cases, buyers are captured by smart brokers or sellers. In very few cases, a seller`s intention is to commit financial fraud. I only share very common scenarios. For the sale of a property, there are usually two types of agreements – a buy and purchase or sale agreement. The sales contract is stamped and registered in accordance with the registration law. There may be a delay between the registration date and the execution of the agreement.
It is generally accepted that when registering a contract, the rights to the property are always transferred from the seller to the buyer. But this perception is not always correct. Bombay High Court recently had the opportunity to address this issue, in the case of the Commissioner General for Income Tax-25 Vs M/s Talwalkars Fitness Club, which was decided on October 29, 2018. The rules on stamp duty and registration fees vary from state to state. In some countries, you can buy stamp papers for stamp duty before registering the property register. The problem is that these papers are not transferable and are not refundable. The validity period is usually 6 months from the date of purchase. Only a few states offer the option of paying stamp duty and registration fees in advance.
Normally, the real estate agreement is concluded within 45 to 60 days. In very few cases, the buyer and seller agree to conclude the agreement in 6 /12 /18 months. In some cases, the registration date was 2 or 3 years from the date of the sales contract. Trust me to increase a buyer`s risk if the agreed registration date is after 12 months. There are several reasons for the delay in registering real estate. Buyers need time to arrange the money, the property is on an irrevocable lease, the seller needs a longer time to make the living arrangement, etc. In such scenarios, a very small amount would have to be paid for the down payment in a real estate transaction. The rule of thumb is that as a buyer, you should not pay more than 20% of the value of the real estate to the seller before registering the real estate. The higher the reason for the amount paid, the greater the risk to a buyer. In my article, 5 points a real estate buyer should not tell a seller I share that you do not share % of the funds that you will pool from his own sources. In a recent request from one of my clients, he planned to pool 70% of funds out of his pocket and use the balance at 30% as a real estate credit. He said the same thing to the salesman.
The seller began to demand 70% towards prepayment in a real estate company and to balance 30% at the time of registration. I suggested to my client to tell the seller that he could not arrange the additional funds, and now he is using 80% real estate credit. Admittedly, the Bombay Supreme Court ruled on 29 October 2018 that the income tax tribunal`s conclusion was correct and that the sale/sale of the property in question was not completed until 2011-12. The court also noted that the court is correct in concluding that on the facts, the agreement was executed on February 14, 2011, was an agreement on the sale of real estate. The law in force at the time required the registration of such an agreement. In any event, simply because it is registered, it does not automatically take on the character of a deed of transport or sale. Similarly, a taxpayer is required to maintain the homehold with a home loan for a minimum of five years, otherwise section 80 C tax deductions will be cancelled for repayment of the principal amount of the home loan during the home transfer year. It also takes into account the actual date of the transfer and not the date of execution/registration of the contract.