Monday, February 29, 2016

RENTING OUT COMMERCIAL SPACES MOST PROFITABLE

RENTING OUT COMMERCIAL SPACES MOST PROFITABLE


Nowadays, Real estate funds are turning towards rental yield assets for investment. The major advantages are the lower risk and regular income associated with such property compared with new developments. At least four real estate funds are raising money about Rs.2,000 crore to invest in rental yield assets.
Interest in rental yield assets has also increased as there is now a substantial stock of property with high specifications that was established in the past three to four years.
Amit Goenka, National Director, Capital Transactions, Knight Frank India Pvt. Ltd., said that it is the first time so many rental yield-focused funds are there in the market. He further said that this trend definitely indicates a shift in the model of investment from development, such as residential projects, to developed  commercial space that has been completed and rented out. In mature Asia-Pacific markets, 70% of transactions are for acquiring existing yield properties.
J M Financial Property Fund, the real estate fund of JM Financial Ltd., managed by Infinite India Investment Management,. is aiming to raise a Rs.400 - 500 crore rental yield fund known as J M Financial Real Estate InCome Fund from domestic investors. The fund has already registered with the regulator. Securities and Exchange Board of India, or Sebi. R K Narayan, Director. Infinite India had said that they are planning to raise the fund from high net- worth individuals and domestic institutions over the next couple of quarters.
Anand Rathi Financial Services Ltd. is raising a Rs.250 crore rental yield fund along with real estate consultancy firm Knight Frank_ After deploying up to 75% of this money, they plan to raise a S 200 million offshore fund.
Indiareit Fund Advisors Pvt Ltd the real estate fund promoted by Piramal group Chairman Ajax Piramal, plans to raise around Rs.1,350 crore in a debt fund a rental yield fund this year.
LIC Housing Finance Asset Management Co., a unit of LIC Housing Finance Ltd., is planning to raise a Rs.500 - 750 crore real estate fund which will invest in rental yield and other assets within real estate. A top LIC Housing Finance official, who did not want to be named, said that they are tying up with different domestic institutional investors and financial institutions. They had registered with Sebi and are likely to launch it by June this year.
Consequent to the slump of 2008-09, returns from development projects have generally been lower than expected because of market conditions. The delays occasioned partly by that slowdown, have eroded the internal rate of returns too.
Rental yield investments have done better. Earlier this month. Kotak Realty Fund sold its stake in Peepul Tree Properties Pvt. Ltd, an information technology park, to Tata Realty and Infrastructure Ltd, for Rs.385 crore, making a fourfold return. Kotak had invested Rs.95 crore in 2006.
Anuj Puri, Chairman and Country Head, Jones Lang LaSalle India, referring to issues such as land acquisition said that Private equity firms are drawn to stabilized assets as they do not carry development risks, which are becoming increasingly difficult to underwrite, given the political flux.
It has been estimated that the demand for office space in India over the next five years 2010-14, will be at an approximate 240 million sq.ft. The National Capital Region that is Delhi and its suburbs, Mumbai and Bangalore will account for 46% of this demand, according to the 2010 Cushman and Wakefield India Real Estate Investment Report.
Narayan of Infinite India opined that for developers, this is a good alternative source for funding and to monetize their assets because real estate mutual funds have not taken off yet and real estate investment trusts have been a non-starter in India or for Indian developers. Real estate mutual funds invest in property, either directly or indirectly.
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Saturday, February 27, 2016

VALID TRANSFER OF PROPERTY RIGHTS BY SELLER

VALID TRANSFER OF PROPERTY RIGHTS BY SELLER


Marketability of Title is the condition precedent for sale of any immovable property. Under Section 55(1) (a) of the Transfer of Property Act, the seller is bound to disclose any material defect in the property or title and to produce all the documents of title to answer the requisitions on title made by the purchaser.  Under Section 55(2) of the aforesaid Act, the Vendor is deemed to warranty the title or the right to sell.
Marketable Title:
The statutory covenant of title is implied in every contract for sale of an immovable property, even if there is no express clause embodying such a warranty. The term “Marketable Title” refers to absolute right, title, interest and ownership of the Vendor to convey the property without any hindrance. In other words, the title is considered to be marketable if the same is free from encumbrances, claims and beyond reasonable doubts. Thus, if there is any encumbrance or claims and the vendor does not discharge it, the title cannot be said to be marketable.
In fact, Section 55(1) of the Transfer of Property Act envisages that if the property is sold subject to any encumbrances or claims, it should be so clearly stated and the Vendor will be under obligation to discharge any such encumbrances existing at the time of sale on the property.
On the other hand, if any encumbrance is found to exist and the same is not revealed before completion of sale, then the Vendor is bound to pay for the same or indemnify the purchaser in that behalf.The primary duty lies on the person intending to sell the property to prove that title of the property is free from any defects and any subsequent transfer will not make such transaction either void or voidable.
For example, if the vendor owns a property as Kartha of the Joint Hindu Family in which minor’s rights and interests are involved, the Kartha is bound to prove the legal necessity for sale or to obtain an order from the competent Court seeking permission to the property on behalf of the minors.
Restrictions on title:
Implied warranty of title on the part of the Vendor, although absolute, will not however apply to cases where there is a clear contract between the parties to the contrary. Such a contract can be either express or implied, but the contract must be such as would clearly negate the warranty of title.Thus, certain restrictions are imposed on the purchaser’s right to examine the title in full, which is done when the Vendor is not sure of making out a marketable title, particularly when the Vendor is not in possession of the property.
Though, the restrictions may be contrary to the provisions under Section 55 of the Transfer of Property Act, the same will be binding on both the parties by virtue of mutual agreement and understandings and even if defect in the title is found subsequently, objections in this regard cannot be raised due to such restrictions.
Where the Vendor stipulated that the property would be conveyed as he has received the same from his predecessor or that the title of the Vendor has to be accepted without dispute or that it should not be enquired into and the Purchaser is bound to accept the title of the Vendor as it appears to be, such a stipulation would be contrary to the contract and Section 55(1) (c) and (2) of the Transfer of property Act will not apply. Further, such a condition will not relieve the Vendor from the obligation of making out the best title though the purchaser would be bound by such condition even if the title is proved to be defective.
However, in absence of such a contract to the contrary, the Vendor is bound to remove all the defects even if the purchaser was aware of the same. Again an express covenant does not, in clear and unambiguous terms supersede the implied covenant. Thus, by virtue of Section 55(2) of the Transfer of Property Act, the purchaser can rest his claim on the implied covenant of title contained therein.
Conditions restricting the title or proof of title to which the purchaser is entitled must neither state nor suggest things which, to the Vendor’s knowledge, are incorrect. The condition will not be binding if it requires the purchaser to assume that what the vendor knows to be false or it affirms that the state of title is not accurately known to the vendor when, in fact, it is known.
Production and Scrutiny :
In order to examine the title of the Vendor, the purchaser has to examine all the relevant title deeds in the possession or power of the Vendor.  Under Section 55(1) (b) of Transfer of Property Act, the Vendor is under an obligation to produce not only those documents in his possession but also in his power to produce.
Thus, if the Vendor has deposited the title deeds with a mortgagee, the Vendor has to produce such documents for inspection of the purchaser through mortgagee. However the Vendor is not under an obligation to produce irrelevant documents not in his possession or power but it is the discretion of the purchaser to inspect the same at his own  cost.It is only after production of all the relevant title deeds, assistance of advocates having sufficient experience in the scrutiny of the title documents will help the purchaser to conclude whether the Vendor has got marketable title or not.
When the property market is favorable to the Vendor, the Vendor, many  times, dictates the terms and tries to foist a title on the purchaser.
Adhere to the norms:
Under any contract of transfer, fundamental principles of Transfer of Property Act must be strictly adhered by the parties, without letting out either of the parties to escape from their respective obligations, which will reduce litigations and ensure transfer of marketable title from the vendor to the purchaser, free from encumbrances, liens, claims, etc. When a faulty title is passed on to the purchaser, it is bound to result in the spate of claims and litigations.
Purchasing the property involves various steps such as scrutiny of title deeds, verification of documents, executing the deed of Agreement to sell, making  payment as agreed between the Vendor and the Purchaser and transfer of ownership and title deeds  in the name of the Purchaser by executing Sale Deed. It is not advisable to purchase a property hastily by approaching the brokers and subsequently entangling oneself into litigations in case of any defective title.
Ownership and right over the property has to be passed on in compliance of the provisions as envisaged under law for which services of Advocates having sufficient experience and knowledge in property transactions is necessary to avoid litigations that are likely to arise in future.
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Friday, February 26, 2016

STAMP DUTY JOINT DEVELOPMENT AGREEMENT

STAMP DUTY JOINT DEVELOPMENT AGREEMENT

The Government of Karnataka under Karnataka Act No.9 of 2009 has brought out certain amendments to the Karnataka Stamp Act, 1957 effective from l" April, 2009. According to this Amendment Act and in terms of article 5(t) thereof, stamp duty chargeable for joint development agreements relating to construction or development or sale of immovable property is at the rate of one rupee for every one hundred rupees or part thereof on the
  1. Market value of the property
  2. The estimated cost of construction of proposed construction or development or proposed development of the property as the case may be which is the subject matter of such transfer under the agreement in accordance with the provisions of sec.28 of the Karnataka Stamp Act, 1957] or
  3. On the consideration of such transfer, whichever is higher?
It is the normal practice that when any landlord desires to develop his agricultural land into an apartment complex, he would enter into a joint development agreement with the developer of his choice. It is also the normal practice that when such joint development agreements are entered into, only the total built up area and the undivided share of land would be shared between the landlord and the developer at the agreed ratio. Not only this, at the time of execution of joint development agreement it would be premature and not feasible for the developer to estimate the cost of construction or the proposed construction or development and sharing of square feet area. In spite of this factual position, when joint development agreements are presented for registration, some of the sub-registrars in Bangalore have been insisting on mentioning some figure as the proposed cost of construction to arrive at the stamp duty payable on registration of such a joint development agreement or the same is referred for valuation under sec.45-A or the document is impounded. Thus, there is no uniform system adopted by the sub-registrars regarding stamp duty on registration of joint development agreements.
To have a clear picture of the issue, Shri S.Selvakumar, Editor, Real Estate Reporter, took up the matter with the Inspector General of Registration and Commissioner of Stamps under Right to Information Act,2005 and sought clarification on the point.
As the information furnished by this authority was not convincing, an appeal was filed before the Appellate Authority under the Right to Information Act. The Inspector General of Registration and Commissioner of Stamps, as an appellate authority, has passed the following order on the subject vide his order No.RTI/239/09-10
"In the instant case, only agricultural land is given for development and there is no mention of cost of construction or proposed construction etc., or there is no consideration for such transfer. Under these facts and circumstances and in the absence of specific case on hand, stamp duty is chargeable on the market value of the agricultural land which is deemed to be the subject matter of transfer under the Joint Development Agreement."
Thus, when a joint development agreement is entered into by the landlord with the developer to develop his agricultural land wherein no cost of construction or proposed construction is mentioned or there is no consideration for such transfer, stamp duty payable will be on the market value of such agricultural land and if the land in question is a converted land, stamp duty payable will be on the market value for such converted land and where there is a fraction of converted land with revenue khata, stamp duty is payable on square feet basis as per guidelines value fixed by the Central Valuation Committee.
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Thursday, February 25, 2016

SELLING UNDIVIDED SHARE OF LAND

SELLING UNDIVIDED SHARE OF LAND


There are several instances wherever the promoters of flat don't transfer the complete extent of land to the patrons of flats. Instead, he or she tends to retain a little of the undivided share that is after victimized resulting in varied complications.
At times, the builder or his representative contend that they're conjointly co-owner of the flat complicated since they own a share of the land and demand that their cars be pose or retailers be made for his or her use.
However, the court within the case involving (writ petition No.39468 of 2002) bank of Travancore and therefore the regime of province et al has command that someone cannot retain ANy undivided share of the land in AN flat complicated unless he or she is an flat owner and in possession of the made space within the building
In1982, the bank of Travancore purchased eight out of twelve flats made within the initial And second floors of AN flat complicated and in hand an 919/1779 undivided share of the land.
Of the remaining four flats on the third floor, 2 flats were purchased by Ms.Bharat Earth Movers restricted and therefore the different 2 by 2 people at the side of a 446 /1779 undivided share of land. The balance 414/1779 undivided share of the land wasn't sold .
The twelve flats within the complicated were punctually two-handed over to the individual house owners in 1982 when receiving the due payments. after, the owner regenerate the automobile parking areas into six retailers in violation of the sanctioned arrange and applied for regularisation of the deviation.
His application was rejected and conjointly the charm filed against the rejection.
The city Corporation was directed to require appropriate action to get rid of unauthorised construction.
When the city Corporation didn't take away the unauthorised construction, M/s.Bharat Earth Movers, one in all the flat house owners filed a judicial writ petition within the Court to direct CMDA and therefore the Corporation to demolish the deviation. The Corporation of city ANd CMDA gave an enterprise to the court that the action would be taken. The deviated parts were after destroyed and therefore the entire automobile parking was two-handed over to the flat house owners for joint possession.
Meanwhile, the promoter of the flat died and his legal heirs claimed that the complete automobile parking on the bottom floor was in their exclusive possession and place up shutters.
This was challenged within the court stating that the complete land on that the flats were made together with automobile parking belonged to all or any the flat house owners.
The promoters argued through their counsel that solely a little of the undivided share of land was sold  and 414/1779 undivided share were preserved by them.
Hence, the promoters claimed that they need a right within the land and therefore the entire ground floor, aside from a little that was sold  to the opposite flat house owners.
Hearing the arguments on either side, the court command that someone cannot retain ANy undivided share within the land unless he or she is an flat owner and in possession of the made space within the building.
States like Karanataka have created it necessary that the undivided share of the land can't be registered in isolation and that they have to be compelled to be registered at the side of the flats. This has helped arranged the issues for the patrons and has conjointly helped earn additional revenue for the State.
What to ascertain in Agreement?
When you get the property, your builder can offer you a date after you have to be compelled to return to registration workplace and every one the agreement work are going to be done. Most of the days, builders are reluctant to indicate you the agreement copy. However they're going to be able to share somebody else agreement copy at their workplace or at the most website.
Just have a glance at that agreement that is sort of a specimen or the format, on a number of the page, you'll see “Details of Undivided Share of Land” and it'll be mentioned in proportion terms like “0.45%” or precise space in sqft terms. simply scan the complete factor rigorously.
Then once the particular agreement should occur, you'll be able to then scan the agreement thoroughly and make certain you take care of now in your agreement copy. A tiny low tip here is that once builder calls you for registration, tell him you'd prefer to precede one hour from the regular time and have a close check out the agreement, if potential conjointly get a attorney with you and have him check out the agreement.
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Wednesday, February 24, 2016

PROPERTY EXCHANGE DEED

PROPERTY EXCHANGE DEED


As per provisions contains in Section 118 of Transfer of Property Act, when two persons mutually transfer the ownership of one thing for the ownership of another, neither thing or both the things being money only, such a transaction is called an exchange. This definition is not restricted to immovable property only.
Thus, exchange implies, when two separate property owners mutually agree to transfer the ownership rights by exchanging the property. Further, exchange also mean exchange of lands and barter of goods too.
If one of the items that has been transferred in money, then it is not an exchange but sale, because sale should always be for a price. But money in one form can be exchanged for money in another.
In case of exchange, the transfer of ownership of one thing is not the price paid or promised to pay, but something else in lieu. For example: if a person transfers a land valued Rs.20,00,000/- to another and in return, the other person transfers a shop valued Rs.18,00,000/- and pay Rs.2,00,000/- in cash, it is an exchange.
This type of exchange transactions can be reduced into writing in the form of Property Exchange Deed.  This Exchange Deed document for transfer of property rights need to be registered with the jurisdictional sub Registrar’s Office by paying prescribed stamp duty.  While drafting the exchange deed and its registration including the document execution, its presentation and admission utmost care need to be taken, since this is a complex process.
Before drafting such complex type deed of transfer, it is very important to ensure that all the necessary requirements for the effective enforcement of such deeds are incorporated which only give legal sanctity to the document. The essential requirements for such deeds are discussed below:
Description of the Deed
The deed has to specify the description, such as “This Deed of Property Exchange”, which may not necessarily be in bold letters, but is preferable, in order to highlight the nature of the deed.
Date of execution
It is very important to mention the date of execution of the deed since the same is required to determine the limitation and also for recording of such exchange in the revenue records. Further, the date of execution of the document may vary from the date of registration. However, the documents can be presented for registration, anytime within four months from the date of execution.
Parties to the deed
All the proper and necessary persons pertaining to the property intended to be exchanged have to be mandatorily made as parties to the deed in order to avoid possible future legal disputes, which may likely to be raised by the parties having interest over the exchanged property. It is also important to properly depict the status of each party to the deed.
Recitals
The deed shall contain the previous history pertaining to the property in a precise way, explaining the nature of the interest and motive behind the exchange of property, which only authenticate the title, and is called as Recitals in the legal terminology.
Covenants
A covenant is an agreement wherein either or both the parties to the deed bind themselves to certain terms and conditions, which create an interest over the property, which may either be express or implied. In recent times, with the advent of Apartment culture, it is very necessary to incorporate covenants of various types besides those for maintenance of common areas and facilities in the deed.
Testimonium
This is the part of the deed which states that the parties have signed the deed. This is very important in order to prove the authentication of the execution of the deed and the necessary involvement of the proper parties having interest in the property in legally conveying to the parties of the other part.
Testatum
This is the witnessing clause wherein the witnesses signing the deed are introduced, along with their names, address and signature. This clause is also very important for the reason that the witnesses also play an important role to prove the execution of the document. However, it is advisable that both the witnesses are from purchaser/ transferee’s side.
Operative words
This part of the deed depends upon the nature of conveyance. However, operative words clearly depict the intention of the parties conveying the property in favour of the other party/ies, which is necessary for transfer of rights over the property.
Parcels
This means description of the property following the operative words. Anything intended to be conveyed/assigned has to be specifically mentioned. Every minute detail about the identification of the property has to be clearly incorporated. Any ambiguity about the description of the schedule property may lead to serious problems.
Exceptions and Reservations
Property intended to be transferred by way of exchange must not fall within the ambit of those prohibited under any statute or the Government notification. This part of the deed speaks about the conditions restraining the alienation and assurance that such alienation does not involve any restrictions.
Exception refers to some property or definite right which is existing on the date of conveyance and the same would transfer if not expressly excluded.
Whereas, Reservation refers to the right which is not existing but created at the time of transfer.
Completion of transaction
The deed can be enforceable only if the same is properly stamped under Indian Stamp Act. Apart from this, it is also necessary that the same has to be registered under the Indian Registration Act. Only after the registration of such documents, the right, interest and title over the property is validly transferred from the transferor to the transferee.
Execution
Execution of the document will be complete only after the parties put their signatures on the deed. However, special care should be taken when any of the deed is signed by the party who is an illiterate or blind or Pardanashin lady. In case any document is signed by some person by putting thumb impression, the documents has to be signed by the person who has taken the same and if any map or plan sketch is annexed to the document, then the same has to be signed by the parties.
Possession of property
It is very important that the transferor transfers possession of the property in favour of the transferee. It is not necessary that actual possession has to be handed over to the transferee, but even constructive possession will transfer and create right and interest over the property.
Thus, the transfer or assignment of right, title and interest over the property, irrespective of the nature of transfer, entirely depends upon the deed of conveyance. Any ambiguity, inadvertent addition or deletion in the deed may give rise to lot of legal problems, thereby obstructing peaceful possession and enjoyment of the property.
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Tuesday, February 23, 2016

DEFECT IN PROPERTY IS DIFFERENT FROM DEFECT IN TITLE

DEFECT IN PROPERTY IS DIFFERENT FROM DEFECT IN TITLE


In recent times, dealings in real estate in Bangalore have been at the peak. Predominant reason for this is the growth of IT sector and the eagerness of the people to invest their money in real estates in and around Bangalore. As the realestates require huge investments, the purchaser has to take necessary precautions before investing his money to save himself from future complications. If the property transferred suffers from any  defect in  the title of the vendor, the purchaser does not get good and marketable title.  Therefore, the purchaser has  to make doubly sure  before finalizing the deal, that the  vendor has got a valid and marketable title.
Marketable Title:
The term “Marketable title” means a title which is clear and free from reasonable doubts and is a title good against everybody.  Thus, it is the title which establishes full ownership of the vendor to the property intended to be conveyed, without reasonable doubt. A buyer is not bound to complete the sale if there are defects in the title to  the property  which are material and latent. The defect to be material, it is to be of such a nature that if the purchaser were aware of it he would not have entered into the contract of sale at all.
Doubtful or defective title:
A title is said to be doubtful when the vendor does not have any conclusive evidence to prove the ownership. The defects in title are generally latent defects which can be found only on investigation of title by perusal of documents, by an eminent advocate,carrying out  searches of Government Departments  and Municipal records and by making reasonable enquiries. The vendor is bound to disclose such latent defects known to him.
A title becomes doubtful:
1.Where the doubt arises by reason of some uncertainty in law itself;
2.Where the doubt pertains to the application of some settled principle or rule of law.
3.Where a matter of fact upon which a title depends is either not in its nature capable of satisfactory proof or is  capable of such proof  but yet not satisfactorily proved.
The ownership of the vendor to the property intended to be sold, must be the  property traceable from the previous title deeds commencing from the Deed which can be considered as a good root of title and for this purpose  at least 30 years previous title would need to be verified. The property should have already been properly  transferred from all predecessors-in-title and no third person other than the Vendor should have any right or claim thereto.
Thus, for example, if ‘A’ has sold the property to B and if it is found that the property under sale belonged to a Hindu Joint Family property and ‘A’ has sold it neither for  legal necessity nor after obtaining the consent from Co-Parceners, then the property sold to ‘B’ is said to be defective.
The following are a few instances where the title cannot be termed as defective:
-An omission to disclose a prior agreement for sale by the Vendor is not a defect in title.
-Title by adverse possession is marketable and not a defective title, if proper title by such possession can be successfully made out. A title may be good  although there are no Deeds but there must have been such a long uninterrupted possession, enjoyment and dealing with the property as to form a reasonable presumption that the title  is absolute .
-Loss of title deed is not a defect, if the loss can be explained satisfactorily.
Defect in property:
Defect in property is different from the defect in title. A defect in the property only prejudices the purchaser in the physical enjoyment of the property but the defect in title exposes the purchaser  to adverse claims. This difference has been enunciated in Section 55 (1) (a) of the Transfer of Property Act, which provides that the vendor is bound to disclose to the purchaser any material defect in the property or in the vendor’s title. The defects in property are generally patent defects which can be seen on an  inspection of the property and the Vendor need not disclose the same so long as the same does not lead to defect in title.
Root of title:
In investigating title and in considering whether the title is marketable and free from reasonable doubts, it is necessary to find out the root of the title. Documents are considered as root of the title. A good root of title is a document purporting to deal with the entire property conveyed, which does not depend upon the validity of any previous instrument and without inviting any suspicion on the title of the Vendor.  It may also be described as a document of transfer of property showing nothing to cast any doubt on the title. An instrument, the effect of which depends on some earlier document is considered as an instrument with insufficient root of title. In India, there is no law which stipulates statutory period for examination of root or commencement of title. However, it is advisable to investigate the title for a minimum period of 30 years unless the circumstances warrant production of documents beyond 30 years.
Though our law makes it obligatory on the part of the vendors to disclose the defects in title  before the  sale of a property, purchasers have also  to exercise due diligence and investigate the title of the property before purchasing the same, to avoid future complications.
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