Ban on GPA sale will Raise Property Prices

The Delhi governments decision to ban sale of property through general power of attorney (GPA) will lead to a sharp rise in the free-hold property prices in Delhi, says 

The Delhi governments decision to ban sale of property through general power of attorney (GPA) will cause hardship to the property owners in Delhi, who bought the property on GPA, which lacked perfect documentation but is free from any disputes. Now, to complete a transfer of property, a seller has to execute a sale deed, which has to be duly registered in the office of registrar or sub-registrar. The decision will affect the availability of saleable property and, therefore, will lead to a sharp rise in the free-hold property prices in Delhi. The divisional commissioner of Delhi issued an order to the registrar and the sub-registrar last week asking them to implement the Supreme Court order dated October 11,2011,banning any transfer of property on GPA or on sale agreement with retrospective effect from the date of issue of the order. The property transaction on GPA or on sale agreement, the Supreme Court order had said, cannot be relied upon or made the basis for mutation in municipal or revenue records. As the government did not enforce the Supreme Court order between the date of the order on October 11,2011,by the Supreme Court and April 27,2012,when the divisional commissioner of Delhi government finally issued the order to ban the transfer of property through GPA or through sale deeds, a number of transactions that took place in the city on GPA and SA during the intervening period will face problem. Now with DCs order, all the transactions that took place during the intervening period will become null and void. That means the property will remain on the sellers name and both the parties will have to initiate the process of transfer of property through a clear sale Rajesh Meahta deed again. But to complete the transaction on sale deed, one needs to have a clear title of the property. In most of the cases in Delhi, because of the archaic regulations, owners of the property do not have a clear title, which they can transfer through a sale deed. You cannot sell a right which you don't have. So, unless, you have the clear ownership, you cannot transfer it. For example, a number of cooperative societies in Delhi do not have a completion certificate, as the builder while constructing a building may not have followed regulations very strictly. In that case, the authority has not issued a title of the property to flat owners despite them living in those apartments for the last, at least 15 years. These flat owners sell their apartments through GPA. But now, after this order, they cannot sell it through a GPA. And, at the same time, they cannot sell it through a registered sale deed, as they don't have a clear title of the property. Most of the apartments in cooperative housing societies and DDA condominiums are sold though a GPA. Now, if the societies have a completion certificate and the original buyer has cleared all the dues, these properties can be converted into freehold. Only after that may owners sell it through a registered sale deed. In a GPA, a seller is conferred the right of converting the property into free-hold from lease-hold to the buyer through a GPA. So, the buyer can exercise the right, provided, the authority declares that the property meets all the legal requirements for the conversion. Only after the property is clear and meets all the legal requirements, does ownership be assigned to anyone. Anshuman Magazine, the managing director of global consultancy firm CBRE (South Asia), says that banning transaction through a GPA is good, as it will bring transparency into the system. But, before banning GPA as an instrument to transfer property, the government should have run a special drive to give a clear title to properties. Similarly, property owners in the unauthorized colonies, which are now legalized, will face immense hardships. A clear title of a property is rare in such colonies. So far, people used to transact through a GPA. But now, as GPA is banned, they will be in a quandary. Because, the authority will not give them a clear title of their property, they cannot sell their property through a registered sale deed. In fact, the whole exercise without adequate preparation on the government side to convert the lease-hold property into a free-hold one, gives immense opportunity to middlemen to make money. Even today, if one wants to convert a lease-hold title into a free-hold one, one has to take the services of a tout. Now, with this fresh regulation, there will be a rush for getting ones property converted to free-hold. This will give touts and middlemen a field day at the cost of property owners. The decision of the Delhi government to declare the sale of immoveable property in Delhi through the use of a power of attorney (PoA) as illegal will significantly impact the residential real estate market, says Shveta Jain, the director (Residential) of Cushman & Wakefield, India. The mid-segment properties in certain pockets of Delhi will be impacted the most and will see a notable increase in prices in the short term owing to reduced availability of transferable properties. Certain pockets like Rohini, Patparganj, Dwarka and Mayur Vihar will see a decline in transactions, as most of the developments in such locations are corporative group-housing societies, which are typically lease-hold. However, the government may need to suggest an alternate solution for the owners of leasehold property in the future, which will help bridge the demand-supply gap, Jain says.

Economic Times, New Delhi, 11-05-2012