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Understanding Property Ownership In India

The laws in India governing the ownership, transfer, and use of property are detailed statutes that have evolved over time, influenced by historical, cultural and socio-economic factors.

These laws, which cover complex property transactions, are essential for regulating the real estate sector and protecting property rights.

This article aims to give a clear understanding of the rights and responsibilities of citizens concerning property, highlighting the history and key features of Indian property laws.

WHAT IS PROPERTY?

The expression “property” itself is not limited to land, it also expands its scope to include tangible rights (physical assets having monetary value) and intangible rights (non-monetary assets that cannot be seen or felt).

Property as a subject is covered under Article 300A of the Constitution of India, which states “No person shall be deprived of his property saved by authority of law”.

This Article was added through 44th Constitutional (Amendment) Act, 1978 changed the status of right to property.

The right in question is no longer considered a fundamental right but is still recognized as a constitutional right. This means that if the government wants to take someone's property, it must follow a law made by the legislature, ensuring fairness and proper procedure.

RIGHT TO PROPERTY: OVERVIEW AND HISTORICAL CONTEXT

Land Reforms:

After India gained independence, the government took several steps to change the way land was owned and used.

These changes aimed to break up large estates owned by a few people (Feudal lords and Zamindars) and give land to the farmers who worked on it. The goal was to end unfair practices and make land ownership more equal. Key reforms included:

Abolition of Zamindari (A system where zamindars who held vast tracts of land, collected taxes from peasants and farmers who cultivated on such lands), and transferred ownership of land directly to the farmers.
Laws were enacted to protect tenant’s rights, regulate rent and prevent arbitrary evictions.
In a bid to distribute extra land to farmers without any, governments introduced Land Ceiling Acts. These acts put a limit on how much land a person or family could own.

Constitutional Provisions:

Back in the 1950s, when the Indian Constitution became a thing, the right to own stuff was a big deal. Two important parts of the Constitution, called Article 31 and Article 19(1)(f), were all about protecting people's right to own property. These articles were considered one of the basic rights that citizens of India had under Part III of the Constitution.
Due to legal hurdles and the general doubt that High Courts in the country would be overburdened with cases related to Right to Property violations, the Parliament introduced the 44th Constitutional (Amendment) Act, 1978 and removed Right to Property from the list of Fundamental Rights, classifying it as a Constitutional Right under Article 300A. This change allowed the government to undertake land reforms and acquire property for public purposes without violating fundamental rights.

TYPES OF PROPERTY RIGHTS

Property is broadly categorised into two main types: movable and immovable property. Each category has its own legal framework for ownership and transfer.

Immovable Property: It includes land and anything attached to the earth such as buildings, trees and fixed structures or objects. The legal framework for immovable property is largely governed by the Transfer of Property Act, 1882, Indian Registration Act, 1908, and state-specific land laws.
Movable Property: It includes all property that is not classified as immovable. This includes tangible items like vehicles, furniture, and jewelry as well as intangible assets such as stocks, bonds, and intellectual property (means creations of mind, inventions and designs etc).

UNDERSTANDING DIFFERENT OWNERSHIP STRUCTURES

Property ownership in India is a fundamental concept and understanding the various types is crucial for anyone considering buying or inheriting property. Some common forms of ownership in India are:

Single Ownership (Sole Proprietorship)

This is the most straightforward form of ownership, where one individual holds the absolute title to the property. The owner has indefinite rights to the property and can use it, transfer it, or lease it as they see fit. These types of owners are required to pay property taxes to the local municipal authority. The Transfer of Property Act, 1882 (TP Act) governs the sale, transfer, mortgage, lease and gift of such properties.

Property taxes are levied by a government on the value of a property. The rates of these taxes vary from state to state. The rate of the tax is assessed by the government and a detailed overview of the property like built-up area, age of the property, type of building is taken into consideration.
The assessed value of a property can be contested by the owner. For instance, if Mr. H believes the assessed value of his property is too high, he can appeal the assessment to reduce his property tax burden.

Joint Ownership/Co-ownership:

This category of ownership involves multiple individuals owning a property. However, majority of the co-ownership in India is held through inheritance where shares are not clearly distributed. The ownership rights and obligations under such situations are governed by inheritance laws applicable, such as, The Hindu Succession Act, 1956 for Hindus. Joint or Co-ownerships include following subtypes:

All owners share equal rights and interests in the property. Such holdings automatically pass on to the surviving joint owners if any owner dies. (Right of Survivorship)
Each owner has a specific, undivided share in the property. Shares can be unequal and there is no right of survivorship. The owners’ share can be sold, gifted or inherited independently.
This kind of ownership of property is designed for Hindu undivided families. Coparcenary is a fancy way of saying that someone can legally own their family's property because they were born into the fam. Before, only the dudes in a joint family got to inherit property just because they were born.

However, with amendments to the Hindu Succession Act, 1956, daughters are now also considered as coparceners.

Property Ownership by Nomination:

In this type of ownership, the owner of the property nominates a person who would get the right of ownership after their death.

Property nomination has already become one of the standard practices among owners because the property owner can ensure that the property will not remain unclaimed or become subject to litigation or dispute after their demise.

Such types of nominations are exercised through a “will” with the help of an advocate on record.

TRANSFER OF PROPERTY ACT, 1882

As a fundamental legislation, Transfer of Property Act, 1882 (TP Act) serves the purpose of governing the transfer of ownership rights to property in India. It aims to define and regulate the process by which property, both movable and immovable, can be transferred from one person to another.

Understanding its key provisions and their use is essential for anyone involved in property transactions.

Key Provisions:

Transfer of Property: (Section 5)

This section means "transfer property." Basically, it's when a person who's still alive gives ownership of something they own to one or more other living people, or even to themselves in the future.. Living entities also include companies and associations.

Types of transfers: (Section 6)

This section helps to differentiate between the types of property which can be transferred under the Act.

It also clarifies certain types of transfers as invalid. Property can be transferred, except in cases where the property is restricted by law or agreement. Such differentiation is done by classifying the properties as transferable and non-transferable.

Eligibility to Transfer Property: (Section 7)

Any person who is eligible to contract, as per Indian Contract Act, 1872, i.e, above the age of 18 years, and entitled to transferable property are eligible to make transfers of ownership.
People who are authorised to handle transferable property can also transfer ownership of that property. It means that any individual who is allowed to sell or give away the acquired property, can make transfer of ownership.

Operation of Transfer: (Section 8)

When property is transferred, the new owner (transferee) gets all the rights and interests the previous owner (transferor) had, unless it is clearly stated otherwise. It includes any income generated (rent, profit) by the property as well as items permanently attached to the property.

Conditional Transfers: (Section 10)

A transfer can have conditions attached. However, conditions that completely restrict the transferee from selling or giving away the property as a gift are not allowed. Such transfers that restrain basic ownership rights are void. Partial restrictions can be valid subject to interpretation.

Transfer By Ostensible Owner: (Section 41)

If someone who doesn't actually own something but looks like they do gives it to someone else with the real owner's permission, the transfer is legit.

Types of Property Transfers under TPA:

Sale (Sections 54-57): Means that something is bought and sold with money or a promise to pay money.
Mortgage (Sections 58-104): Property is transferred to secure a loan.
Lease (Sections 105-117): Trading the right to use a property temporarily for money.
Exchange (Sections 118-121): Mutual transfer of ownership of one thing for another.
Gift (Sections 122-129): Transfer of property without consideration.

PROPERTY REGISTRATION AND ITS PROCESS

As a general principle, the process of property registration in India is governed primarily by the Registration Act, 1908. This act sets out the rules and procedures for registering documents, including those related to the transfer of property.

Process of Property Registration under the Registration Act,1908:

1. Document Preparation

Sale Deed: This is a written document outlining the details of the property sale, including parties involved, description of the property, sale price, and mode of payment. Other relevant documents like proof of identification are also required. The sale deed is prepared on a non-judicial stamp paper of appropriate value.

Stamp papers are special papers issued by the government on which certain documents or agreements must be written to be legally valid. However, for the purpose of property agreements, a non judicial stamp paper is required which are used for non legal documents agreements, contracts, leases, power of attorney, and other legal documents that don't directly involve court proceedings and it doesn't carry the same legal weight as judicial stamp paper. The stamp duty is calculated for issuance of such papers based on the property value as per state government rates.

2. Duty and Stamp Registration Fee Payment

The stamp duty must be paid as per state government regulations. The amount is typically a percentage of the property value mentioned in the sale deed.

3. Visit to the Sub-Registrar’s Office

A visit has to be made to the Sub-Registrar's office within whose jurisdiction the property is located. The Sub-Registrar will accept the submission of the sale deed, supporting documents and proof of stamp duty and registration fee payment.

4. Verification and Registration

The Sub-Registrar will verify the documents and ensure the parties involved are present and willing to proceed with the sale. Upon successful verification, the Sub-Registrar will register the sale deed, making it a legal record. The buyer would receive a certified copy of the registered sale deed as proof of ownership.

Additional Considerations:

You can appear in person or appoint a legal representative to handle the registration process on your behalf.
Some states also offer online registration options for ease and convenience.

DISPUTE RESOLUTION MECHANISMS

In India, property disputes are common and can arise due to various reasons such as unclear ownership, inheritance issues, and illegal possession. The Indian legal system provides multiple mechanisms to resolve such disputes. The mechanisms involves:

1. CIVIL COURTS

Civil courts are the primary forum for resolving property disputes in India. The key legislations that govern property dispute resolution includes:

The Code of Civil Procedure, 1908, which outlines the procedure for filing suits, conducting trials, and delivering judgments.
The Specific Relief Act, 1963, which provides remedies if contracts are not performed by a party, often relevant in disputes involving property sale agreements.

2. ALTERNATIVE DISPUTE RESOLUTION (ADR)

ADR mechanisms are increasingly being used nowadays to resolve property disputes due to their efficiency and cost-effectiveness. ADR mechanisms are methods of resolving disagreements outside of the traditional court system. These methods aim to find solutions that are quicker, more affordable, and often more efficient than litigation.

Mediation: Arbitration and Conciliation Act, 1996
Under Section 89 of CPC, courts can refer disputes to mediation. A neutral third party or a mediator is appointed to help the parties explore solutions. The mediator doesn't impose a decision, but guides them towards a mutually agreeable settlement. The decision is not binding on either of the parties.

Arbitration: Arbitration and Conciliation Act, 1996
Parties involved choose a neutral third party (arbitrator) with expertise in property matters. The arbitrator conducts a hearing, considers evidence presented by both sides, and issues a binding decision that can be enforced like a court order.

LOK ADALAT: LEGAL SERVICES AUTHORITIES ACT, 1987
Lok Adalats are informal courts established under the Legal Services Authorities Act, 1987. They provide a speedy and a more affordable way to resolve disputes, especially in rural areas. Settled disputes at Lok Adalats are enforceable like court orders.

Important note:

The choice of dispute resolution mechanism depends on how complex a dispute is in reality. Simpler disputes might be resolved through negotiation or mediation, while complex issues might require arbitration or court interference.
Negotiation and mediation are generally quicker and cheaper than arbitration or court litigation. However, in arbitration, parties have some control over the process and the chosen arbitrator. Courts offer less control.

REAL ESTATE (REGULATION AND DEVELOPMENT) ACT, 2016

The Real Estate (Regulation and Development) Act, 2016 (RERA) has significantly impacted the Indian real estate sector, particularly in terms of property transactions. This Act was particularly designed for addressing disputes between home buyers and developers. This ensures timely completion of projects and protection of buyers’ interests. Here's how RERA aims to make property transactions easier and more secure for homebuyers:

Increased Transparency:

RERA mandates the registration of all new residential and commercial real estate projects exceeding a certain area with the relevant RERA authority in that area. This creates a public record with project details like plans, approvals, and timelines.
Developers are required to publicly share important details about the project, like the usable space you're actually getting for your apartment (carpet area), the amenities that will be available, any permissions they have received from the government, and how far along construction has come. This information helps buyers make informed decisions without any hidden surprises.

Protection of Buyer Rights

RERA promotes the use of a common format for sale agreements, making the terms and conditions easier to understand for both buyers and sellers. These are called Standardised Agreements.
Under RERA, most of the money (at least 70%) that buyers pay to the developer goes into a special bank account (Escrow Account). This account is like a box with two keys: one key is held by the developer and the other is held by RERA. The developer can only use the money in this account for building the project, not for other purposes. This helps ensure that the money is used for the intended purpose and reduces the risk of the project getting stuck due to lack of funds.
RERA also provides financial protection. In case of delays exceeding the stipulated timeline, developers are mandated to pay interest to buyers as compensation. This provides some financial relief for the inconvenience caused to the buyers.

Efficient Dispute Resolution

RERA sets up a system to solve disagreements between buyers and developers quickly. Instead of going through lengthy court cases, there are special authorities such as Appellate Tribunals and Adjudicating Officers, who can hear and decide the dispute. This is much faster than the traditional court system.

Improved Efficiency and Streamlined Approvals

RERA aims to speed up project approvals by simplifying the process with a single-window clearance system for all necessary permissions. This helps in reducing project delays.

RECENT AMENDMENTS AND UPDATES

Prohibition of Benami Properties (2024 Amendments)

The Finance Bill 2024 proposed an amendment to the Prohibition of Benami Property Transactions Act. This amendment allows Benamidars (individuals holding property in someone else's name) and beneficial owners (the actual owners) a period of only 3 months to respond to Show Cause Notices issued by authorities.
This amendment empowers Initiating Officers (government officials who can initiate benami proceedings) to grant relief from penalties to benamidars and other parties involved if they cooperate with investigations and disclose benami transactions.

Long Term Leases under RERA

The Bombay High Court ruled that RERA also applies to long-term lease agreements (long term rental agreements), ensuring that delays in possession under such leases can lead to compensation with interest.

Model Tenancy Act, 2021

This Act was introduced in 2021, which aims to balance the interests of landlords and tenants. It provides a guideline for states to manage rental housing, clarifies the rights and duties of both parties, and encourages the use of formal rental agreements. Model Tenancy Act, 2021

FREQUENTLY ASKED QUESTIONS (FAQs)

1. What are the legalities involved for registering a property in India?

Registration of the sale deed with the Sub-Registrar's office is mandatory. This involves stamp duty payment, registration fee payment, and document verification.

2. How can one verify the title of a property?

One can verify the title of a property by checking the title deed, encumbrance certificate (this document shows if there are any loans or outstanding bills on the property), property tax receipts, and conducting a search at the sub-registrar's office to ensure there are no legal disputes or pending claims on the property.

3. What legal remedies are available for resolving property disputes in India?

Legal remedies include filing a civil suit in a civil court, opting for alternative dispute resolution methods like arbitration, mediation, and conciliation, and approaching specialised tribunals like the Real Estate Regulatory Authority (RERA) for real estate disputes. Majority of property disputes are settled through Alternative Dispute Resolution (ADR), which provides easy and out of court settlements.

4. What is the role of the Real Estate Regulatory Authority (RERA) in dispute resolution?

RERA handles complaints from home buyers regarding project delays, quality issues, and other grievances against developers. It provides a platform for quick and effective resolution of disputes related to real estate transactions.

5. What is the importance of a sale deed in property transactions?

The sale deed is a legal document that serves as proof of the sale and transfer of ownership of property from the seller to the buyer. It must be registered with the local sub-registrar to be legally valid.

REFERENCES

[Provisions of TPA Act] (https://www.kotak.com/en/stories-in-focus/loans/home-loan/transfer-of-property-act-india.html)
[Amendments and Updates](https://timesproperty.com/news/post/recent-amendments-in-rera-blid3877]
Types of Property Ownership
Property Law in India

Written by Shubhankar Krishnan

A Delhi University graduate and a 1st Year Law Student, Gaining experiences in Areas under General Corporate, litigation and Intellectual Property Rights.