If you are buying a property that is on leasehold, make sure that the seller has obtained a transfer memorandum from the local development authority.
What is a transfer memorandum?
A transfer memorandum is an official permission granted by the development authority to the owner (seller) of the property allowing to transfer his rights to the buyer.
File photo of residential and commercial buildings in Gurgaon. Bloomberg
Why is the permission needed?
Development authorities in most states provide land development rights to developers and sell the residential units for a lease of 99 years. For example, New Okhla Industrial Development Authority (Noida) gives land to develop apartment projects only on leasehold. So anyone who buys a flat in a residential or commercial project will actually own it only for 99 years and the authority technically remains the first owner. However, even under leasehold, you need to get the property registered in your name. The lease of such properties is usually renewed after the term is over and for all practical purposes, you are the owner.
How to get the memorandum?
After the negotiation is done for a property, the seller needs to file an application to the revenue officer in the development authority office requesting permission to sell or transfer the property. Along with the application, he needs to submit copies of title deeds and a no-objection certificate from the residents’ welfare association. The application will also mention your name as the buyer of his property, address of the property, your current address and the likely transfer date.
For processing the permission, the seller will have to deposit a sum of Rs 1,000 as processing fee. However, if you do not want to go through the process yourself, you can outsource the work to a property lawyer or the broker. However, for this you need to shell out a minimum of Rs 2,000-5,000.
It takes 10-15 days for the authority to verify details and authenticity of the seller and the buyer. Once the officer grants the permission, the seller can sell the property. However, the transfer should be conducted within 60 days from the date the authority permits the sale/transfer. If you and the seller fail to complete the transaction within this time frame, the seller will have to file a fresh application.