What is meant by valuation of property?
The valuation process evaluates
the market value of the property. Demand
and supply forces operating in the market,
as well as other factors like type of
property, quality of construction, its
location, the local infrastructure available,
maintenance, are all taken into consideration
before the market value is decided.
does property valuation help?
Typically, if a real estate
agent is asked to judge the value of a
piece of property, he would do so based
on information of recent sales or purchases
of similar properties in that area. Though
this may give a fair idea of the property’s
market value, an official property valuation
would carry more weight. E.g. if you need
to use this piece of property as a security
against a loan, the bank’s loan
approval process would be faster and smoother
if the property is certified by an official
value. Many banks now insist on valuation
certificates before issuing loans using
properties as security. The value thus
certified may also have chances of getting
a higher amount of loan sanctioned. Another
benefit of official valuation is that
it is a useful negotiating tool when selling
the property. Such certification also
becomes essential in situations where
the correct value of the property has
a legal bearing—such as, a will
statement, insurance papers, business
balance sheets etc.
is the meaning of a property’s market
value? How is its stamp duty decided?
The price that a property
can command in the open market is known
as its market value. Stamp duty is based
on the market value or the agreement value
of the property, whichever is greater.
What does the term ‘Leasehold
When a piece of property
is given or ‘leased’ to an
individual (known as the ‘Lessee’)
for a stipulated period of time, by the
owner of the property (known as the ‘Lesser’),
the property is referred to as Leasehold
Property. A certain amount is fixed by
the Lesser to be paid as lease premium
and annual lease. The land ownership rights
remain with the Lesser. Transfer of property
requires prior permission.
does the term ‘Freehold Property’
When ownership rights for a piece of property
are given to the purchaser for a price,
that property is referred to as Freehold
Property. Unlike in the case of leasehold
property, no annual lease charges need
to be paid and the freehold property can
be registered and / or transferred in
there any benefits in converting a leasehold
property to a freehold one?
There are several benefits: if you convert
the property to a freehold property, you
become a full-fledged owner by getting
the sale deed and having it registered.
A freehold property has better marketability
and can be sold, mortagaged or kept for
standing security, which cannot be done
with leasehold property.
there any income tax considerations while
transferring newly acquired property?
If the transfer takes place within three
years of purchase, the income tax exemption
under Section 54F of the Income Tax Act
does not hold good.
constitutes conclusion of sale of a property?
An agreement of sale, coupled with actual
possession of the property would be considered
as a conclusion of the sale. Usually,
the entire amount is paid at the time
of handing over possession.
is the difference between carpet area,
built-up and super built-up area?
The area of an apartment or building,
not inclusive of the area of the walls
is known as carpet area. This is the area
that is actually used and in which a carpet
can be laid. When the area of the walls
including the balcony is calculated along
with the carpet area, it is known as built-up
area. The built-up area along with the
area under common spaces like lobby, lifts,
stairs, garden and swimming pool is called
super built-up area.
there are apartments of different sizes
in a complex, how is the maintenance charge
Legally, the actual area owned by the
individual is the basis for calculation
of maintenance charge.
do Co-operative Housing Societies collect
a Sinking Fund?
Cooperative Housing Societies have a statutory
obligation to collect a Sinking Fund.
This is done so that in case the building
needs to be repaired or reconstructed
in the future, the society has sufficient
funds to carry out the work. The amount
to be contributed is decided by the General
Body of the society; it should be at least
¼ percent per annum of the cost
of each apartment, excluding the cost
of the land. This fund may be used after
a resolution is passed at the General
Body meeting with the prior permission
of the Registering Authority. This could
be to carry out reconstruction, repairs,
structural additions or alterations to
the building as the architect thinks is
required and certifies.
corporate bodies use residential properties
as office space?
It is illegal to put residential properties
to commercial use. However service-based
industries are allowed to operate from
residential areas, on the condition that
they will vacate the property if any complaint
is received from other residential owners.
aspects should be considered?
Before purchasing property from a company,
it is necessary to verify with the Registrar
of Companies that the property is not
mortgaged or is not being used as a security
against a loan, otherwise it is not considered
a freehold property.
14.Does an NRI
need RBI permission to acquire residential
or commercial property in India?
No permission is required if an NRI wants
to acquire any immovable property in India,
except if it is agricultural / plantation
property or a farmhouse.
a person of Indian origin residing outside
the country acquire commercial property
Properties apart from agricultural land
can be acquired by people of Indian origin
residing outside India. However, the payment
must be made out of inward remittances
in foreign exchange through normal banking
channels or out of funds from the purchasers’
NRE / FCNR accounts maintained with a
bank in India. A declaration also has
to be submitted to the Central Office
of the RBI (form IPI 7) within 90 days
from the date of purchase or of final
a person of Indian origin residing outside
India wants to sell property in India,
are sales proceeds allowed to be remitted
out of India?
This is allowed if the property has been
purchased on or before 26th May, 1993.
But the property must be sold at least
three years after the date of the final
purchase deed or the date of payment of
the final payment installment, whichever
is later. An application (form IPI8) also
has to be made to the Central Office of
Reserve Bank within 90 days of the sale
of the property.
an NRI rent out property in India if it
is not required for immediate use?
Yes, property can be rented out in India.
The rental income or income from any investment
of the rental amount can also be remitted
outside the country.
is a lease agreement created?
A lease agreement can be reached in either
of two ways, depending upon each case:
In cases where the lease contract is from
year-to-year / exceeding one year’s
rent /reserving yearly rent, then a registered
instrument can be created, which both
the lesser and the lesser must execute.
In cases other than the above, an oral
agreement followed by delivery of possession
is considered enough.
are the charges to be paid while gifting
A. When a gift of property is made, a
gift deed needs to be made by a lawyer.
Stamp duty on the market value of the
property also needs to be paid, as well
as the necessary registration charges.