Is it safe to purchase a property solely on the basis of a General Power of Attorney (GPA)? Can this document be revoked in court, rendering the transaction null and void? Before signing on the dotted line, homebuyers must understand all of the nuances of purchasing a property. Based on this document alone, navimumbaihouses.com examines the complications associated with purchasing a property.

Purchasing a property through General Power of Attorney is a popular method of transacting in Indian real estate. However, according to a 2011 Supreme Court of India order, transferring property through GPA is illegal. Despite this, what attracts homebuyers is the lucrative offer that comes with this channel of property purchase because most sellers are desperate to sell their assets. Thus, before signing on the dotted line, homebuyers must understand all of the nuances of purchasing a property through the General Power of Attorney (GPA) and carefully assess the safety of such transactions.

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What exactly is a General Power of Attorney?

It is the authority granted by a person to a friend to conduct specific financial or legal transactions on his or her behalf. It is a common practise when the original owner is unable to be physically present, such as when Non-Resident Indians (NRIs) or disabled owners are involved. In this case, they give the GPA to a trustworthy individual who has the authority to conduct business on their behalf.

General Power of Attorney Applications

In the following situations, a GPA is used:

• To handle property-related issues on behalf of the owner
• In charge of managing the principal’s finances.
• For handling medical matters on behalf of the principal
• As stated in the GPA agreement
• It is not the same as a Special Power of Attorney. How? Continue reading to find out!

What is the meaning of Special Power of Attorney (SPA)?

The SPA is used when you give someone the authority to perform a specific task categorically. For example, if you authorise someone to act as your legal representative in a specific case, that person will only be able to represent you in that specific case.

A general power of attorney gives the agent broad authority, whereas a special power of attorney limits the agent’s options.

Is it necessary to register a GPA?

To be legally valid, a GPA must be registered with the sub-office. registrar’s Furthermore, the GPA is not indefinitely valid. It is valid for the principal’s or the person who is awarding the GPA’s lifetime. It can also be revoked during the owner’s lifetime. The SPA, on the other hand, is revoked once the specific task assigned to it is completed.

Can a registered GPA holder sell real estate?

No. Even if the GPA is registered with the sub-office, registrar’s the GPA holder does not have the authority to sell the property on behalf of the owner. Even the most recent Supreme Court of India decision invalidates the sale of a property via GPA. A GPA holder is only authorised to carry out tasks assigned by the owner, not to sell property.

GPA in the real estate industry

Given the legal complexities of the GPA route, it is generally not advisable to pursue a land deal through this method. However, it was common in India because it benefited both the buyer and the seller financially.

The buyer is required by law to pay stamp duty and registration fees to the government whenever the titles of a land piece are changed. The seller must also pay capital gains tax on the transaction. These charges are avoided by transferring property through a GPA, resulting in a significant loss to the exchequer.

Why are GPA transactions appealing to people?

From the standpoint of a seller, the GPA route allows them to sell a property even if they do not have clear title to it. A buyer, on the other hand, is enticed by too-good-to-be-true real estate deals. Other legal provisions provide impetus to the GPA transactions. Many urban development authority schemes that allot properties on a leasehold basis have a lengthy gestation period before the property can be legally sold. The GPA route is frequently used to avoid such provisions.

GPA is also a shady way of putting unaccounted money into the real estate market.

When asked about the consequences of a GPA transaction. “Generally, purchasing a property through the holder of a power of attorney is not advisable.” There is, however, one exception. When the holder obtains irrevocable power in exchange for consideration, one may deal with the power holder. Even in that case, an agreement to sell or a similar document must be used to ensure that the holder has some substantive right in the property. Such authority should ideally be registered. An irrevocable power with interest continues to be valid even after the grantor’s death.

Any other type of power is dangerous, especially if it is not even registered. Even if a power is made irrevocable, it can be revoked at any time. Furthermore, it expires upon the grantor’s death. Unless coupled with an interest, the law does not recognise any irrevocable power. Purchasing property with such a power is extremely risky and increases the likelihood of unforeseen complications. As a result, it must be avoided.”

The Supreme Court’s decision on property transfer via GPA

The Supreme Court of India’s 2011 order states unequivocally that the GPA is not a transfer instrument when it comes to right, title, and interest in immovable property. The Court went on to say that a power of attorney is simply an agency created on behalf of the grantor in favour of the recipient, also known as the grantee. Furthermore, even an irrevocable power of attorney does not transfer title to the recipient. As a result, GPA is ineffective for the sale/purchase of real estate. Transactions involving immovable property can only be completed through the use of a stamped and registered conveyance deed, as required by the applicable State government Act.

Following the aforementioned decision, the Apex Court directed municipal bodies not to register properties based on GPA documents. Genuine GPA transactions, on the other hand, would be unaffected. According to the Supreme Court, GPA allows for large-scale tax evasion, including income tax, wealth tax, and stamp duty and registration fees. Furthermore, GPA transactions make it easier to keep black money and make illegal profits.

GPA Order by the Delhi High Court

Following the Supreme Court’s ruling that GPA could not be used as an instrument of transfer for immovable property, the Delhi High Court ruled that property registration through GPA will not be barred in genuine cases, as stated in the Supreme Court’s ruling. The Delhi High Court went on to quote the Supreme Court decision, stating that the sub-registrar will register the transfer as long as the transaction is genuine.

It went on to say that GPA can be used to execute sale or development agreements between a developer and a plot owner in the development of a piece of land for the construction of a residential building. Given the Delhi High Court’s decision on GPA. The Delhi government legalised GPA property transfers of illegal constructions where sale deeds are not available.

What if you purchased a property through GPA?

You may have “purchased” the property, but without a registered sale deed, you will not be considered the legal owner. You will also be unable to sell the property without the sale deed. Furthermore, banks have a policy of NOT financing GPA-related projects.

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