| The
Chandigarh administration in an attempt to put a check on
transfer of property as it has been done in Himachal Pradesh
so as to prevent the loss of revenue, artificial boom created
by the dealers and the investors and also to plug other malpractices,
is laying stress on the use Power Of Attorney (POA).
Keeping this in view, in Chandigarh maximum
commercial properties are on leasehold which means that these
properties cannot be sold under the law of the land and registered
with the Estate Office but can be transferred through POA
only. Flats in certain sectors like sector 41 to 52 and also
in 38 west are also on lease and can be transferred on POA
only.
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This is done by the administration in order
to control the boom in the real estate sector. And to some
extent the government has been successful as these properties
are not sold openly and thus the rates are controlled. The
POAs are very effective in cost control. For e.g. a 2 bedroom
flat in MDC is for 35 lakhs whereas on lease it can be available
for 21-22 lakhs.
A power of attorney (POA) is an authority
given by way of a formal instrument whereby one person, who
is called the donor or principal, authorises another person,
who is called the donee, attorney or agent, to act on his
behalf.
Whereas. Section 1-A of The Powers of Attorney
Act, 1882 defines Power of Attorney as "Power of Attorney
includes any instrument empowering a specified person to act
for and in the name of the person executing it".
A freehold property (plot or a flat) is one
where there is a whole and sole owner(s), ownership is full
and unconditional (within the provisions of the laws of the
land) and there is no lessor / lessee involved.
Where as leasehold property is the one where
the government or the authority remains the owner of the property
for a specific time period usually 99 years. A specific lease
is paid by the lesse to the lessor who in this case is the
government, which may be changed from time to time.
It can be transferred through a POA only
and no registry can be done on it. But POAs can be done on
leasehold as well as a freehold property. This means that
freehold property can be transferred on POAs and Registries
but the leasehold can be transferred through POAs only.
The Administration is also trying to find
out a way of eliminating power of attorney sales as there
are risks and malpractices associated in buying a flat on
Power Of Attorney (POA) basis because purchasing a property
on a POA basis is not permitted under the law of the land
and also person can sell a property to more than one buyer
on POA basis which is not possible in the case of registry.
For example if Mr. A sells a flat to Mr. B on POA and the
same to Mr. C also, and then Mr. C sells a 2 bedroom flat
to Mr. D on a registry bypassing Mr. B completely.
Here Mr. becomes the owner of the flat and
Mr. B ultimately is at complete loss. Though the party at
default can be sued, then the court proceedings are time consuming
and expensive also. POA can be either revocable or irrevocable,
depending on what sort of a POA one has made.
Though instruments like Agreement to Sell,
Conveyance Deed, Exchange of property, Gift Deed, Partition
Deed, Power of Attorney, settlement and Deed and Transfer
of lease attract Stamp Duty on market value of the property,
the amount of stamp duty in the case of POA is less than the
Registry.
The time limit of a POA can vary depending
upon the will and the potential of the buyer. But usually
the properties are on lease for 99 years which means that
till 99 years these cannot be sold on registry, no loan can
be taken on such property and also no construction or renovation
can be done on such property.
A specific amount of rent is to be paid on
the leasehold property which can be percentage of the basic
price. For e.g. say if a property of 1 kanal in Mohali whose
freehold rate is 1.3 crore then the leasehold rate would be
around 70 lacks which would be paid as rent in equal amounts.
The disadvantages of a leasehold property
are that a person cannot take loan on a leasehold property
but can be availed on a freehold one. Also there are problems
on the registry of a property if it is on a POA.
There is no denying the fact that the POAs
have been effective in controlling the property rates but
the government should try to take some more fruitful measures
to curb the escalating real estate prices.
Real
Estate Contracts | Fee
simple | Leasehold
vs. Fee Simple | Buying
the freehold of a flat |
Buying
the freehold | What
is freehold land? | Best
Real Estate Property Investment Potential |
Consolidation
Loans Being Free | Freehold
and Leasehold Property in Chandigarh |
