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I often have a running joke that I tell people at parties (funnily, I stopped receiving invites after telling this joke). It goes somewhat like this: “If you or someone you know doesn’t have a property dispute, they are not Indian.” With 67 per cent of court cases (civil) dealing with property disputes, it is certainly not a laughing matter.
Property ownership was supposed to be an asset, but the ugly truth is that it has become a liability compared to other asset classes. With 7.2 million court cases blocking the development of $200 billion (estimated) worth of real estate, one has to be disappointed about society’s lack of will and political resolve to solve a long-standing problem of fellow citizens.
The genesis for all these issues is the model that India has adopted. If we look at the UK and Singapore, they have followed a conclusive titling system, meaning that the government verifies the seller and the property before clearing the transaction. Because the government has confirmed the seller as the owner, the respective agency provides a single title deed to the purchaser. India, however, has a presumptive ownership system where the government is not responsible for purchases/sales, and it is up to the purchaser to verify if the seller is the owner. Many people assume that a sales deed is actually a title. But I digress; let us get to the more practical task: should I buy property knowing all these sceptical facts? Absolutely. Land is not being manufactured daily, and technology is unlikely to change that soon. I’ve yet to read a scientific or economic paper discussing the downward movement in land prices once Elon musk colonizes Mars.
Now with all that said, one must bear in mind the importance of conducting a deep dive into property records before making a purchase. The first step in this process is to retrieve an encumbrance certificate (EC). In some states, this is also called a non-encumbrance certificate (don’t ask me – ask the government). An EC displays the current owner of the property as well as the transaction chain going back 20-25 years in some states. Essentially think of the EC as a skeleton providing guidance on all the documents to be collected and provided for a legal opinion which can be retrieved using a survey number attached to the property. There are apps today to make EC available on your tips; however, those in the more adventurous and masochistic phase of life can visit the local Sub Registrar Office (SRO) for an expedition of a lifetime to retrieve the EC. Who doesn’t want to stand in long lines in the hot sun? Raise your hand.
Now, if the reader believes the procedure listed above is enough to ensure the property diligence is complete, I hate to be the bearer of bad news. A prospective property purchaser must also visit the revenue office to ensure property tax receipts, electricity bills, and water bills are also under the same owner’s name. Apparently, our government departments value their independence and have decided to operate siloed systems without integration to maintain common ownership profiles. Say what you want, but in this system, at least no one can hack one department to change property ownership records.
Once the pilgrimage to the holy departments of registration and revenue is complete, we are now headed to the lawyer’s office to get a legal opinion after submitting all necessary documents requested. Legal opinion is mandatory for property transactions and even loans from financial institutions. After a legal opinion is obtained and the property purchase is complete, I wish I could inform the dear reader that his magnificent voyage is complete, but it is not. A legal opinion is similar to the “Letter of Comfort” that the RBI recently banned. While the lawyer stating that the property title is clean is one thing, they will not protect you against future litigation. Have got to love the lawyers right? For that reason and to keep out stray animals and humans, it is essential to fence the property, put up a name board and if it is precious, employ a security guard with a CC camera on site. Make sure to update all revenue documents reflecting the ownership change as well. After all of this, hope for the best and prepare for the worst. Good luck and happy property hunting!