as you have made up your mind that the flat was let on tenancy basis under the rent act, then nothing can be done. you would know better
a triparty tenancy agreement will have to be made and registered in which the GM will be the outgoing tenant and GS will be the incoming tenant. by this document you will be transferring the tenancy in favour of the GS with the consent of the GM against whatever is the settlement terms arrived at to compensate the GM for surrendering her tenancy right and handing over possession to the GS
the stamp duty on the above agreement will be 6% on 90% of the RR value of the flat
for granting ownership rights to the grandson, you will have to make a deed of conveyance of reversionary interest which will have to be stamped (6% on the RR value of the flat) and registered
in order to save stamp duty being paid twice over for the above two transactions, you can proceed as follows -
take a surrender affidavit from the existing tenant. this requires only notary. no registration
then make a deed of transfer in favour of grandson to transfer ownership rights in the flat. this document will attract 6% on the rr value of the flat or agreement value whichever is higher
as no reply was given by you to my first reply to your question, i cannot give any further details