How to conduct due diligence before you buy land in India

While each individual dream of owning a property once in their lifetime, many people still prefer to buy or invest directly in the land. The land is the main cost component of a property purchase and has a much higher return than other types of real estate. It also gives the purchaser the freedom of choice in terms of layout, design, floor plan, etc. However, when purchasing land, you must do thorough due diligence.

Title due diligence for buying land in India

One of the most significant aspects of purchasing land is to verify that the title is clear and marketable. This means that you must confirm whether the person selling the property owns it and has all the necessary rights to transfer ownership of the property to you. It is always advisable to consult a lawyer/advocate to carefully review the title documents such as sale deed and property tax receipts and obtain a certificate confirming the title of the seller. It is usually advisable to track the title for the past 30 years, taking into account the complexity of land documents and the restrictions involved in claiming property rights.

Search in the offices of the sub-register

This search reflects the transactions (change of ownership by deeds) and encumbrances (legal fees) in relation to the land proposed for acquisition. Each state has a different methodology to investigate at the offices of the sub-registry (deed-registering authority). For example, in Bengaluru, the sub-registrar issues the encumbrance certificate (search report), while in Maharashtra, a lawyer or a person with manual search experience in sub-registrar offices issues the report. Before the real estate agreement is concluded, it is necessary to consult the relevant authorities for the legal documents.

Public notice to buy land in India

Before buying a property, it is always advisable to place a public notice in local newspapers (preferably in English and in local language daily newspapers), inviting any claim over the land proposed for sale. This helps to know if there are any claims or rights of third parties over the land.

Power of attorney

Often, the land is sold by a person who has a power of attorney (POA) on behalf of the owner. This POA should be closely examined to make sure that it is the same land that is being sold. There are times when it may be required to sign certain documents within a short period and delaying the same, may usually cost you. To avoid such situations, you can authorize another person to sign on your behalf to make things easier.

Review of original documents for land purchase

Before concluding the sale transaction, it is advisable to check if the original title documents are available in relation to the real estate transaction. This is to ensure that the seller has not created any third-party rights/charges and parted with the originals. These original documents should be collected at the conclusion of the sale transaction.

Permits and permissions to buy land in India

If the property/land that is part of the sale transaction already has structures or buildings, it is advisable to verify that the approved plans, required permits and NOCs exist. Factors such as the rules of cultural heritage, Set-back for roads widening that apply to specific buildings should also be taken into account.

Taxes and Khatha

Before purchasing a land, the buyer should ensure that the property tax is paid by the date of transfer and the original receipts for these payments are submitted for review. It must also be ensured that the Khatha (revenue recording indicating the name of owner) is available in the name of the vendor.

Local laws on buying land in India

The buyer of the property should ensure that local laws/regulations do not impose restrictions on the purchase of land. For example, in Karnataka, a non-farmer (who does not own any agricultural land), businesses, companies, and people with an income above Rs 25,00,000 cannot buy agricultural land. Such restrictions, however, are relaxed in some other states. Therefore, it is essential to seek legal advice from a local lawyer before purchasing land.

Tenure of the land

The tenure of the property should also be considered when purchasing land. If the land is under lease and the excess tenure of the lease is short and if no renewal is foreseen for the same old lease, the additional lease may be payable by the buyer of the land. There is also a high probability that there is no extension clause for the property.

Pledged land

The seller could have borrowed from a bank by mortgaging or pledging his land. The buyer should ensure that the seller has paid any amounts due on the land. A clearance certificate from the bank is important to determine that the land is free of all debts.

Measurement of the land

The buyers are advised to measure the land before registering it in their name. To ensure that the dimensions of the property and its boundaries are accurate, the buyer should seek the help of a recognized surveyor. You can also compare for accuracy by purchasing the surveying sketch of the land/property from the survey department.

Floor space index (FSI)

FSI shows how much construction can be done on a piece of the land. FSI is determined by the state’s town and country planning department. And it also depends on the location of the plot. You should check with the seller or the owner about the amount of FSI allowable on the land.

It is also very important to involve a property lawyer to verify the documents and the legality of the project.