Why Property Verification Is Important Before Buying a Flat, Plot or House in India

Documents You Should Check Before Buying Any Property

Even if a property looks clean and legitimate, there may be unseen legal risk. Different types of property require different checks. Here is a list of documents that should be verified in most scenarios.

• Sale Deed — Official document registering transfer of property from seller to buyer. Verify that it is registered at the Sub-Registrar office, and that the description, measurements and parties are accurate.
• Mother Deed and Previous Title Documents — The mother deed refers to the first sale deed registered for a property. Finding earlier sale deeds, gift deeds, partition deeds or court decrees confirms the seller's continued title and may uncover gaps in ownership.
• Agreement to Sell — Created prior to the sale deed. Review the agreement for clauses regarding possession, payment schedule, default and the seller's legal warranties on title.
• Chain of Title — Documents showing progression of sale deeds from current seller to first sale deed. Look for gaps in registered paperwork, or unregistered transactions.
• Encumbrance Certificate — Certificate issued by the Sub Registrar confirming all registered transactions, mortgages and loans on the property for a certain period. Obtain a minimum of fifteen years worth for review.
• Mutation Record — Documents provided by the revenue department confirming transfer of ownership for tax purposes. Ideally should match Sub-Registrar records.
• Property Tax Receipts — Documents showing history of tax payments may help confirm physical possession of property.
• Electricity and Water Connection Records — Electricity board and Jal Board documents.
• Possession Letter — Letter stating the date on which possession was or will be transferred to buyer. Newly built homes from a builder will receive this document on take-over of property. In resale scenarios, you should also confirm that the ownership documents and possession documents match.
• Completion Certificate — Issued by municipal authority on completion of construction. Residential builders are required to obtain this before selling.
• Occupancy Certificate — Issued by local authority certifying a building is suitable for occupancy. Physical handover of the property is not legally allowed until this is obtained in some states.
• Building Plan Approval — You should verify plan approvals from the local development authority or municipal corporation.
• RERA Registration — If buying under-construction property from a builder, verify that the project is registered under the respective state RERA authority.
• NOC from Society or Builder — For resale flat transactions, get the NOC from society. If the builder has any dues from the seller, you should ask for a loan clearance letter.
• Loan Closure or Bank NOC — If seller had taken a loan for property purchase, obtain a No Objection Certificate from bank on closure of loan.
• Identity and Authority Documents of Seller — PAN card, address proof and identity documents of seller should be verified. If the seller is a company or trust, additional authorisation documents must be checked.
• Power of Attorney, Will, Partition Deed or Family Settlement — If the seller is selling under one of these arrangements, a closer look at the validity of these documents should be undertaken.

How Property Verification Helps Prevent Fraud

Property fraud can happen in India, and verifying the details of a property transaction can help prevent falling victim to it.

Sale deeds can be forged. Fraudsters may create false documents that appear to have been legally registered, or they may alter existing documents. Verification of original documents kept on record at the Sub-Registrar office can expose this.

Properties can be sold to more than one buyer. Double sales happen when two buyers purchase the same property, often because the seller entices a new buyer after having already sold to a previous buyer. This sometimes occurs in markets with a brisk resale demand like Delhi NCR for new builder floors and plots.

Sellers may not disclose if the house is mortgaged or has an existing loan. If a property is sold without the buyer's knowledge that the seller has an outstanding loan, the lender can claim ownership of the property.

If the property was built without required approvals or exceeds permitted dimensions, they can be sealed or demolished by municipal authorities. Many buyers in Delhi, Noida or Greater Noida have discovered after buying properties that they are unauthorized constructions.

Family members can claim ownership of property years later. With inherited property or older family property, if more than one family member has an ownership stake, and all didn't sign off on the latest sale, it can lead to litigation.

Transactions by GPA (power of attorney) instead of outright property ownership are risky. General Power of Attorney can be legally revoked by the principal authorising the transaction. They can also be contested by family heirs or rendered invalid upon the principal's death.

Step-by-Step Property Verification Process Before Purchase

Verify property involves a series of investigation steps.

First, the buyer or their lawyer reviews all the documentation provided by the seller. Everything from the property's sale history, to tax receipts, to public land records will be helpful. Find out what's missing.

NEXT, you'll want to verify seller identity and make sure they have legal authority to sell. You can do this by matching ID documents, verifying PAN, and understanding how the seller acquired the property.

Thirdly, you will perform a title chain review. For this, you'll want to trace ownership of the property at least 15 years through sales transactions, but further back if there are any questions regarding chain of title.

You'll then want to verify land records at the Sub Registrar office, as well as take note of the Encumbrance Certificate.

Fifth, you should check for mortgages or loans that have been taken against the property. If there is an existing loan, is it officially closed?

Verify building approvals with the local municipal authority. If the property is under-construction by a builder, you should also check the project is registered with the state RERA.

Seventh, verify that actual possession matches what is described in papers. Sometimes dimensions don't match up or other parameters.

Eighth, before you make a large payment, have your lawyer review the agreement to ensure it's fair and protects you.

Ninth, you should get a detailed legal opinion from your lawyer, before you make your final decision.

Is Bank Loan Approval Enough for Property Verification?

A bank's approval of your home loan application is not a substitute for a buyer's own property verification.

It is likely that the bank has performed legal due diligence on the property before approving your loan. But they will be primarily concerned about two things: confirming the title is good for mortgage purposes, and ensuring the value of property is sufficient security for the loan amount.

The bank's lawyers will therefore not necessarily identify all potential title defects. They may not scrutinize historical title beyond a certain date, they may not physically visit the land records office to confirm revenue records match sale documents, they may not catch possession discrepancies, and they are not obligated to review all potential risks that matter to you as a buyer.

Additionally, many homebuyers have found legal issues with properties in Delhi NCR that had previously been approved for bank loans by other lenders. While bank loan approval should certainly reassure you, it should not be the sole basis of your buying decision.

Common Mistakes Buyers Make Before Buying Property

We've seen these happen many times to buyers who skipped or rushed property verification. Avoid them.

• Trust what the broker says and skip document verification. In most cases, broking houses are simply middlemen between buyers and sellers. Unless your broker is also a qualified lawyer, you should always independently verify property.
• Checking only registry copy and no other documents. A registry copy of sale deed only proves that a transaction took place between two parties. It tells you nothing about seller's title history, nor any mortgages/charges/files against the property.
• Ignoring title chain. Just because your seller has provided a recent sale deed, it does not mean earlier sales deeds are free of defects.
• Accepting mutation records as proof of ownership. Mutation is an entry in revenue records. While it does show who is paying property tax, Indian law does not accept this as proof of ownership.
• Falling for fake RERA registration numbers. Builders may give fictitious RERA registration numbers for projects that are not yet registered. Verify on the RERA website yourself.
• Buying GPA property without checking the title of the person giving GPA. Proceed only after you have verified the underlying property title and the validity of the power of attorney under which the seller is selling.
• Seller claims he inherited property, but you didn't check if he has legal right to sell. If a property is shared by family members, verify that all other owners have sold their share too, or obtain consent from other owners.
• Seller says he owns the flat and shows you an agreement he signed with builder. Don't ignore the need to verify title just because your seller has an agreement with the builder. Pay attention to clauses related to title guarantee, possession and completion, extension of time, refund policy, and what happens if the builder defaults.
• Paying cash token amounts without any written receipt. Avoid this, even if you had to pay token amounts before verification. Always obtain a written receipt.

When Should You Consult a Property Lawyer?

You should consult a lawyer at the earliest stage of your property purchase journey.

More specifically, consult a lawyer before you pay a single penny or sign any paperwork. Here's what that means:

You should consult a lawyer before paying token advances or amounts, before you sign an agreement to sell (flat) or builder-buyer agreement (under-construction project), before you register at the Sub-Registrar office.

If you're buying inherited property, or if the seller claims to be selling on behalf of the legal owner through a will or family partition, get a lawyer to review those documents as well.

If your seller is selling through a power of attorney rather than direct ownership, validate the power of attorney with your lawyer.

If you're buying an under construction project, get your lawyer to verify the builder's plan approval and RERA registration.

If the property you're buying has an existing loan or mortgage against it, check with your lawyer that the seller has cleared the loan with bank and obtained a No Objection Certificate.

If your seller provides a chain of title, verify all prior sales and ensure there are no missing links, such as unregistered family settlement deeds.

If seller's name is on the mutation records but possession has not been transferred to him (or her), you should ask questions and consult your lawyer.