Tri-party sale of property from builder, land owner and seller

Hi,

My father has recently sold his property, registered in his name, in Allahabad. This property was about 30 years old. Now, he is planning to re-invest the sale proceeds in a property in Bangalore in my name. We are two sisters in the family and I am married while my sister is unmarried. I have selected HM World City, JP Nagar, Bangalore and I have finalised three properties in this apartment complex for purchase as listed below:

1) New flat from Builder HM Constructions: This is the simplest of all transactions where-in recently completed tower (in year 2020) in the apartment complex has 3BHK units available for sale.

2) Resale from previous owner in the apartment complex: The current owner has made the purchase of this property in year 2007 and is now selling the property after 15 years.

3) Tri-party sale of property from builder, land owner and seller: There are some owners who have their last tranche of payment to the builder and land owner pending. They have also not got the property registered in their name. However, they have shared a simple agreement with builder and land owner claiming to be the rightful owner of the property. Now, when purchasing from such owner, the property will be directly registered in my name from the builder which will save the registration cost for the current owner. The current owner has a pending loan of Rs. 25 lakhs with Bank of Baroda. The current owner of the property has confirmed that he will clear all his dues with builder, land owner and Bank and get their NOCs. He has also confirmed that he can help me talk to all three of his creditors directly.

I have following questions:

1) Can my father make the payment for the property and can he get it registered in my name without any compliance complications especially related to capital gains taxes?

2) In case the new property value goes above 1 Cr then will there be any issues related to taxation?

3) In case I opt for the third tri-party sale option, can there be any significant complications in the transactions that I need to be aware of?

4) Is there any legal procedure or any specific documentation like affidavit to be followed while getting NOC from the land owner, builder and bank?

5) The apartment complex is BDA and RERA approved but it is a B-Khata land parcel. All good banks are offering bank loans on the property. The builder has been saying they will get A-Khata conversion done but it has been pending for past 15 years. What are the possible problems that I might face for owning a B-Khata property?

Asked 3 years ago in Property Law

Religion: Hindu

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6 Answers

1) since father is absolute owner of property sale proceeds should be invested in his name or in your joint names to save capital gains tax

2) don’t purchase property in your name only

3) tripartite agreement should be stamped and registered

4) no dues certificate should be obtained from builder and NOC for sale of flat from builder

5)B

khata properties are those properties that are built on lands without valid approvals.B khata does not give the rights to a property but are an acknowledgment that tax for the proeprty is being paid to the government. It is not a title deed but is an entry entered in Form B and hence, they are name B khata. The court ordered BBMP to issue property identification number (PID) to all properties whether they are being assessed or not for property tax

6) the order states that Property Identification numbers should be assigned to all properties that fall within the jurisdiction irrespective of whether the property is being assessed or not. The court mentioned that until this is done, there is no point in including properties in form B register and issuing extracts and related documents to them.

Ajay Sethi

Advocate, Mumbai

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The first 2 properties can be purchased by tour father in your name. Capital gains tax is levied only when you don't reinvest in the property. There is no 1 cr ceiling wrt tax.

In case of the 3rd type of transaction there are complications. You should engage a lawyer who may discuss the modalities of the transaction as multiple parties are involved and each has to be on the same page in order complete the transaction.

An agreement to sell may be made with tge current owner stating all the details.

NOC has to be taken from the blland owner and builder.

As far as tge classification of khata is concerned, yours is an illegal property ie B-khata property and hence it should be converted into A khata. Why he hasn't converted it should be asked and appropriate property taxes should be paid.

Moreover, as per my knowledge, Property cannot be resold or ownership transferred in case of an B-khata property after the Karnataka high court judgment in 2014.

Rahul Mishra

Advocate, Lucknow

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Dear Client,

Your father can make payment for the property and get it registered in your name because you can plan a sale of immovable property and reinvestment with planning for tax exemptions.

In case you go with the tri-party sale option you need to get NOC along with an affidavit from the respective owner, builder, and bank as it is extremely crucial when it comes to property transactions. You may face problems while reselling the property if it is B-Khata property.

Anik Miu

Advocate, Bangalore

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1. Your father can claim exemption from capital gains tax to the extent of the capital gains he derived by selling his property by reinvesting the gains in the purchase of new residential property either on his name or in the name of his children.

2. The seller will have to pay the applicable capital gains tax by selling the property over Rs. 1 crore, however the buyer has to reflect the purchase in his/her ITR.

3. In case of the third option, you make sure that the seller is discharging the housing loan and obtains NOC from bank and executes a tripartite agreement involving the land owner/builder as necessary party to the agreement.

4. They will be having some sample formats, but you must go through the contents carefully and sign the same only when the contents are satisfactory or after referring the same to a lawyer for an opinion.

5. If the builder is not able to get A khata even after the lapse of 15 years, then ther are less possibilities that you will get A khata to this property, therefore it is advisable that you keep away from buying this property.

The bank will not be bothered about A or B khata for sanctioning the home loan, it is decided based ion the repaying capacity of the borrower.

The RERA is not concerned about the A or B khata land, it is concerned about the construction aspects with the builder who has to comply with the requirements as specified by the authorities.

T Kalaiselvan

Advocate, Vellore

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Father can very much purchase property in you name without any compilations. A property can be purchased from funds of sale of property in any of blood relative’s name avoiding tax liability.

Buyer will be deducting TDS on above 50L at 1 per cent from sale proceeds.

All the parties involved should sign as witness on the sale deed before Sub-Registrar as witnesses and give their NOC.

NOC should be in the form of declaration by all the parties in favor of buyer.

There are thousand of B Khata properties, State Government cannot take the risk taking any punitive actions against them. They will be regularized in due course.