How to Transfer Property Ownership in India: A Comprehensive Guide

With all the legal formalities involved. transferring property ownership in India could be slightly challenging if you aren’t aware of the nitty-gritties of it. You may sale or gift your property or relinquish your property altogether via specific deeds.

To understand the processes involved in transfer of property ownership better, we have provided a step-by-step guide detailing how property transfers take place and what types of deeds are involved in such. Let’s dive in!

Understanding Property Ownership

Property ownership means you legally own a building. This ownership gives you the right to use, sell, or rent your property. You can decide about your space, from renovations to where to plant a garden.

Transferring ownership is important for several reasons. First, you can pass your property to family or friends when you move or sell. 

Second, it protects your investment. If you don’t transfer ownership properly, disputes may arise later, especially as you had it through a home loan. Lastly, clear ownership records help avoid legal issues. When you understand how to transfer ownership, you ensure a smooth process and secure your asset for future generations. Knowing how to handle property ownership is vital for maintaining control and benefiting from your investment.

Key Reasons to Transfer Home Ownership

Here are some common situations that require transferring property ownership:

• Selling the property: When you sell your home, you must transfer ownership to the new buyer. This step ensures the new owner has full rights to the property, and it is not a loan transfer.
• Inheritance: If a family member passes away and leaves you their home, you must transfer ownership to claim your inheritance legally.
• Familial changes: Life events like marriage or divorce often lead to ownership changes. Transferring ownership is essential if you and your spouse decide to share or split assets you had through a home loan.
• Gifting: You may want to gift your property to a loved one. This requires a formal transfer to make the gift official.
• Willing: When you prepare a will, you can specify who receives your property after you’re gone. Transferring ownership helps your wishes become a reality.

Different Types of Property Transfer Options Available in India

1. Sale Deed (Sale Agreement)

A Sale Deed is the most common form of property transfer where the ownership of a property is transferred from the seller to the buyer for a consideration (money). It is executed after an agreement of sale is made between the buyer and the seller. It must be executed on a non-judicial stamp paper, signed by both parties, and registered with the local sub-registrar office. Once the Sale Deed is registered, the buyer becomes the legal owner of the property, and the transaction is legally binding.

2. Gift Deed

A Gift Deed is used when the transfer of property occurs without any monetary exchange. The property is voluntarily given as a gift by the donor (the giver) to the donee (the receiver). The deed must be executed in writing, signed by the donor, and registered with the sub-registrar. In some cases, stamp duty is applicable (which varies from state to state). It is irrevocable once executed, and the donee becomes the legal owner of the property.

3. Will / Testamentary Transfer

A Will allows a property owner to transfer their property to heirs upon their death. The transfer is conditional upon the death of the property owner. The Will must be in writing, signed by the testator (the property owner), and witnessed by at least two witnesses. It must be probated (validated by a court) to be enforceable in some cases. The transfer takes effect only after the death of the testator, and the distribution is governed by the terms laid out in the Will.

4. Partition Deed

A Partition Deed is used when a property owned by multiple parties (such as co-owners or family members) is divided among them. It is often used to settle property disputes or divide inherited property. The deed must be signed by all parties and registered with the sub-registrar. The property must be clearly identified and divided among the parties. It results in the division of property into separate shares, with each co-owner becoming the sole owner of their respective share.

5. Relinquishment Deed

A Relinquishment Deed is executed when an individual (usually a co-owner or heir) gives up their right or share in a property in favor of other co-owners or legal heirs. The deed must be executed in writing and registered. It requires the consent of all parties involved, and the relinquishing party voluntarily waives their claim to the property. This deed does not involve any exchange of money but instead involves voluntarily relinquishing a right to the property.

6. Transfer of Property under the Transfer of Property Act, 1882

The Transfer of Property Act, 1882 provides the legal framework for the transfer of immovable property in India. It covers a variety of transfers, including those by sale, gift, mortgage, lease, and exchange. The transfer must be made in writing, and registration requirements will depend on the specific type of transfer (sale, mortgage, etc.). This Act governs the general principles and conditions for transferring property, including the rights and liabilities of both parties involved in the transaction.

7. Lease Agreement

A lease agreement transfers the right to use and enjoy the property from the lessor (owner) to the lessee (tenant) for a specified period in exchange for rent. This is not a transfer of ownership, but a transfer of the right to occupy the property. It must be executed in writing, specifying the lease term, rent, rights, and duties of both parties. Registration may be required if the lease period exceeds 12 months. The lessee gains possession of the property but does not have ownership rights. The property reverts to the lessor once the lease term expires.

8. Exchange Deed

An Exchange Deed is used when two parties exchange their properties. It is a form of transfer where one property is traded for another of equivalent value. The deed must be executed in writing and registered. Stamp duty is applicable, based on the value of the exchanged properties.

Both parties become the owner of the exchanged property after the transfer, subject to the conditions in the deed.

9. Power of Attorney (POA) Transfer

A Power of Attorney (POA) allows one person (the agent) to act on behalf of another person (the principal) to manage or transfer property. However, it is important to note that a POA itself does not transfer ownership, but gives authority to the agent to transfer ownership on behalf of the principal. The POA must be executed in writing, signed, and registered. The agent must act within the authority granted in the POA. A POA can be used to execute property transfers, but the actual transfer (e.g., Sale Deed) must be executed by the principal or authorised agent.

Documents Required for Property Transfer in India

• Aadhaar Card: Copies of Aadhaar cards of both the seller and the buyer.
• Passport Photos: Passport-sized photographs of both the seller and the buyer.
• Original Sale Deed: The original copy of the previous sale deed for the property.
• No Objection Certificate (NOC): A No Objection Certificate under the Land Ceiling Act, if applicable.
• Property Registration Document: Latest property registration document to verify ownership.
• Municipal Tax Bill: A recent copy of the municipal tax bill for the property.
• Building/Construction Completion Certificate: If applicable, to confirm that construction is completed and approved.
• Agreement between Builder and First Buyer: The original agreement between the builder and the first buyer (if the property is being sold by the first buyer).

Charges Applicable for Property Name Transfer

• Stamp Duty: A state-specific tax imposed on property transfers. In Maharashtra, stamp duty ranges from 4-7% of the property’s market value or the value mentioned in the agreement, whichever is higher. The exact stamp duty rate can vary depending on the state.

Step-by-Step Process for Property Transfer in India

Step 1: Due Diligence

Verify the property’s ownership, title history, and any encumbrances (legal claims). Check the legality of the construction and the property’s compliance with local regulations. It is advisable to hire a lawyer to examine documents like the sale deed, title deed, encumbrance certificate, building approvals, and property tax receipts.

Step 2: Agreement to Sell

After completing due diligence, the seller and buyer execute an agreement to sell. This agreement includes the terms of sale (sale price, payment terms, possession date, etc.) and binds both parties legally. Ensure that the agreement is legally signed and enforceable.

Step 3: Sale Deed Execution

After the agreement to sell, a sale deed is drafted and signed. This is the legal document that officially transfers ownership from the seller to the buyer. The sale deed includes, Property description (location, size, etc.), Sale price and payment terms, Rights and responsibilities of both parties, and any other conditions of the sale.

Step 4: Payment of Stamp Duty and Registration

The buyer is responsible for paying the stamp duty, which is calculated based on the property's market value or sale consideration, whichever is higher.

The payment is made at a designated bank, and once paid, the sale deed is registered with the local sub-registrar.

Step 5: Handover and Possession

After the sale deed is registered and the stamp duty is paid, the seller hands over the possession of the property to the buyer, based on the agreed possession date.

A joint inspection may be conducted to confirm that the property is in the condition as agreed.

Step 6: Mutation and Update of Records

After possession, the buyer should initiate the mutation process, which involves updating the property records with the new owner's name.

Mutation is carried out at the local municipal or panchayat office. The buyer will need to submit documents like the sale deed, updated property tax receipts, and identity proofs to complete the mutation.