RISK IN PURCHASE OF PROPERTIES SITUATED IN VILLAGE PANCHAYATH LIMITS

(Advocate S Selvakumar|Property advocates in Bangalore|Property lawyers in Bangalore)

Generally, Bangalore Development Authority (BDA) and Bangalore Metropolitan Regional Development Authority (BMRDA) sites are having good title and constructing house on such sites would be easy and hassle-free. These sites do have proper water, electricity and other civil amenities. However, in view of the fast growth of the City, these infrastructural facilities lag behind the demand of the Citizens.

 

To get sites allotted from BDA is not an easy task and people have to wait for long time to get a site allotted from them. Therefore, people who intend to have shelter of their own, purchase village Panchayath sites either in the form of revenue site or converted site without approval of the layout. In and around Bangalore more than 5lakh village Panchayath sites are owned by the Middle Class and Lower Income Group (LIG) people.

Revenue Site

A Revenue site is one, that is situated in the layout formed on the agricultural land for a non-agricultural purpose,without proper approval under the Relevant Law i.e., Karnataka Land Reforms Act, Karnataka Land Revenue Rules and other provisions of Law.All around Bangalore, it is common practice for the people to buy sites formed on agricultural lands in unapproved layouts, generally referred to as Revenue Sites, unaware of the hassles involved in buying such sites. Small-time Promoters/Brokers misguide the Buyers and attract them into buying such revenue sites. 

As per zonal regulations of the Comprehensive Development Plan, a Green Belt Area is meant only for agricultural activities.Non-converted land continues to be agricultural land and there are various restrictions on sale and purchase of agricultural land.In Bangalore Urban Agglomeration, Bangalore BDA is the competent Authority to approve layouts where road width, residential area, civic and other amenities have to be provided as per Law.The Bangalore Metropolitan Regional Development Authority (BMRDA) is the regulating authority to approve layouts on the outskirts of Bangalore.

Imaginary site

Small-time Promoters, who want to make easy money are forming layouts on agricultural lands and are marketing these revenue sites to the intending Purchasers through their Agents.The modus-operandi adopted by them involves hatching manoeuvres with Panchayath Officials and in connivance with Sub-Registrar's Officials to create imaginary site documents. These Promoters/Brokers misguide Buyers and attract them to buy sites formed on the agricultural lands.

It is not legal to form layouts and sell sites in the agricultural land falling under Green Belt or other areas situated around Bangalore.Even after formation of layouts and sale of such sites, RTC (Record of Rights, Tenancy and Crop Inspection) will remain in the name of the original Land Owner.The numbers assigned to the sites in these layouts would never match with the survey numbers assigned by the Survey Department.The Purchaser of the revenue site doesn't get the title and also cannot exactly locate the site. What is purchased in these layouts is only an imaginary site. After selling such revenue sites the original Land Owners may sell the same property to someone else at a later date as agricultural land, which is a legally valid transaction that is happening all around Bangalore.

Revenue sites having Khaneshumari number without any link to the old survey number are being registered in the Sub-Registrars office by the Owners in alliance with the Brokers either by creating or manipulating the documents. Some unscrupulous persons at the entrance of the Sub-Registrar's Office make bogus form No: 9 & 10 and 1 & 12 and deceive the innocent Purchasers.

Modus Operandi

Generally, brokers will take General Power of Attorney (GPA) from the Land Owners for the entire land. Most of the revenue sites are registered on the strength of GPA. Only a very few people take care to check up the legality of the GPA is executed by the original Vendor. Nobody bothers to find out whether the GPA is registered or not and whether the Executor of the GPA is alive or not.

If the Executor of the GPA is not alive, any transaction entered into after his death on the basis of such GPA is totally invalid. A joint GPA executed by two or more Owners would become invalid if any one of them dies. Property falling under the village Panchayath area alone has the genuine site status.

Misleading Statements

In the recital of a Sale Deed, it is customary to mention how the Seller has acquired his title, interest and rights to the immovable property from origin to the end. In the case of revenue sites, the brokers at the office of various Sub-Registrars have devised a very ingenious method to hide this fact.They merely mention in the recital that the property is the ancestral property of the Seller. In this way, the Brokers pass on the defective title of the property to the innocent Purchasers.

No layout can be formed on land for which final acquisition notifications are issued and the free grant lands belonging to Schedule Caste and Schedule Tribes Community. However, there are instances where the small time Developers forms layouts on these lands as well. Any purchase of site formed on such lands would not provide any good title to the Purchaser and such lands would vest back in the original allotte or in the Government as the case may be.

Therefore, every precaution needs to be taken while making purchase of sites formed on the lands situated in Village Panchayath limits.There are several instances, where the lands notified for acquisition and the land granted for schedule caste people have been made into sites, where the Purchaser of such a sites would not get title of the property upon such purchase.

Denial of Bank Loan

The burden of proving the validity of title of the property is transferred to the Purchaser, who purchases such revenue sites after paying the full consideration. He actually purchases headache upon such purchase and in the aftermath he loses his lifetime money and peace because of various legal wrangles. Purchasers of such sites would be deprived of even the Bank loan since no Bank would sanction loans for purchase of such sites formed on revenue lands. If the title deeds are not clear and does not establish a marketable title, it is impossible to obtain Bank loans for construction by mortgaging these sites.

Deficiencies in Revenue Layouts

The sites formed on agricultural lands are situated on the outskirts of the City. There will be no proper roads, electricity or water supply. There is no scope for immediate development of the locality.With all this, if the prices of the sites appreciate over a period of years, the original Land Owner will appear form nowhere and start cultivating the area. He will remove all the boundary stones laid by the Broker/Small-time Promoter making it difficult for the Purchaser to identify his property. In certain cases, the GPA Holder sells the same sites to several persons and collects money from all of them. Consequently, marathon litigation awaits the Purchaser.The Laws are so complex that they give rise to multiple interpretations.

Restrictions on Village Panchayath

Village Panchayath cannot issue Khatha for any new area without proper notification. If Village Panchayath Secretary sanctions building plan, it is ultra vires act of such a person. He is not empowered to sanction such building plan as per the provisions of Law.No building can be constructed on agricultural land without obtaining conversion orders and layout plan and building plan should be approved by the concerned Authorities. Residential layouts can be formed only in the residentially converted lands. Such lands should be in the residential zone as per zonal regulations. The Special Deputy Commissioner is the competent authority to grant permission for conversion of agricultural land for non-agricultural purpose.

Competent Authorities

Authorities like BDA/BMRDA are the competent authorities to sanction of building plans as per Karnataka Town and Country Planning Act, 1961. Gram Panchayaths shall grant permission upon payment of requisite fees for erection of the building if the same is in accordance with the provisions of the Karnataka Panchayath Raj (Gram Panchayaths Control over Erection of Building) Rules, 1994 and the Bylaws made under the Act. Where a Planning Authority is not constituted under the Karnataka Town and Country Planning Act, 1961, in any local area, the town improvement board constituted under any Law for the time being in force having jurisdiction over such local planning area shall be considered as the Planning Authority. Where there is no such town improvement board, the local Authority having jurisdiction over such local planning area shall be considered as the Planning Authority.Bangalore Urban District and Bangalore Rural District are declared as the Planning Authorities under this Act.

A site or site with building situated within the Village Gramathana limits, as per the village map of Department of Survey and Settlement, is exempt from conversion subject to sanction of building plan by the Planning Authorities. Chapter IV of Karnataka Panchayath Raj Act 1993 deals with functions, duties and powers of gram Panchayaths, Adhyksha and Upadhyaksha. Even according to this, Village Panchayaths are not competent to sanction building plans.

It is advisable that the Purchasers may not get carried away by the attractive marketing strategies adopted by the Small-time Promoters and Brokers, who leave no stone unturned to market the sites formed on the agricultural lands without complying with the requirements of Law.Instead, they may purchase a smaller site in an approved layout and have peaceful enjoyment of the property.

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Advocate S Selvakumar

Property advocates in Bangalore

UNDER VALUATION

(Advocate S Selvakumar|Property advocates in Bangalore|Property lawyers in Bangalore)

The word under valuation is most frequently used in transfer of property, which is linked to stamp duty and registration charges. It is necessary to understand, the constitutional provisions of stamp duty before embarking on under valuation. Articles 246,265,268,269(I) are relevant to stamp duty. The Article 246 refers to the powers of parliament and state legislature to make laws.The constitution has union list, state list, and concurrent list. The parliament has powers to make laws in case of union list and state  legislature  has powers to make laws in case of state list and both have powers to make laws in case of concurrent list.The article 265 makes it very clear that no tax shall be levied or collected except under authority of law. Stamp duties are listed in all three lists with clear demarcations.

Stamp duty registration charges are a source of major income to the states. The department of registration and stamp duty of Karnataka is ranked among the top five revenue earners to the state. The revenue so earned from different sources is utilized for development, administrative expenses of the state. Thus every state aims at increasing its revenue and also to plug any leakage.

Ceiling on Stamp Duty 

The stamp duty and registration charges are payable on advolerem basis, that is based on the value. There are no maximum stipulations. They increase with the amount of consideration of conveyance of property, higher the consideration, more the stamp duty and registration charges. These charges are to be met by the purchaser unless there is a contract to the contrary. Apart from purchase price, stamp duty, registration charges, the purchaser has to expend to get revenue records mutated his name,and for transfer of power and water connections to his name. All these expenses work out to about 15% of purchase price. To avoid such heavy expenditure, the parties to deal, disclose value of the property less than its actual market value, thus pay less stamp duty and registration charges. But the purchaser will pay the actual market value to the seller. This process is called under valuation. This modus operandi has two implications:

1. Loss of revenue to the state.
2. The circulation of unaccounted money.

Both have adverse effects on the National Economy. In order to avoid under valuation, The State Government has come out with legislation. In fact Karnataka Stamp Act 1957 has certain sections dealing with under valuation. The Section 45-A was inserted into the Karnataka Stamp Act 1957, during 1975 and 45-B was brought in during 1991.

Pending Registration

The Section 45-A deals with the procedure to be adopted for dealing with documents, where the properties are undervalued. The parties producing documents for registration have to file the market value of property calculated in prescribed form I. If registering officer has reasons to believe that the market value of the property in the document, which is produced for registration is not truly mentioned, he may arrive at the market   value of such property and inform the parties to pay the stamp duty and registration charges according to the market value arrived by him. He may proceed with the registration, If the party pays the stamp duty/registration as arrived by him.

If not he may  keep the process of registration pending  and refer the matter to the Deputy Commissioner along with a copy of the document for determination of the market value of property and proper stamp duty payable there on. For arriving at the market value, the registering officer will use the guidance value published by the committee constituted for estimation of market value under Section 45-B. the registering authority informs the market value as arrived by him in form 1-A.This gives options to the parties to contest the valuation done by the registering authority, or to agree or to withdraw the document from registration.

The deputy commissioner after hearing the objections of the parties during the course of enquiry shall determine the correct stamp duty payable.The parties have to pay the difference amount.

Suo-Moto Action

Many times the parties agree to pay the stamp duty based on the market value as determined by the registering officer and get the document registered.Inspite of this the parties receive notice to pay the increased stamp duty.The Deputy Commissioner has some special power called suo-moto powers, this means on his own. Here the deputy commissioner acts without any reference to him. The time limit is two years from the date of registration. Within two years he may examine any document, and has reasons to believe that the correct market value of the property is not set forth in the document, he may determine the correct market value; call the parties to pay the proper stamp duty.That is how the party’s gets notice even after registration process is completed.

Appeal to Divisional Commissioner

In case, the parties are not satisfied by the market value and the proper stamp duty, as determined by the deputy commissioner, they may appeal to the divisional commissioner, but has to deposit 50% of the difference amount of the stamp duty as determined by the deputy commissioner. In the appeal to the divisional commissioner if the stamp duty already paid by the parties is found to be correct, excess amount deposited (50%) will be refunded.If the determined market value is found to be higher and the stamp duty paid is less, the parties have to pay the difference amount with 12% interest from the date of execution of document.The Karnataka Stamp (prevention of under valuation of Instruments)Rules 1977 deals with the procedure to determine the market value of the property, and the procedure to be adopted for conducting enquiries.

The Karnataka Stamp (prevention of under valuation of instruments) 1977 provides guidelines to deputy commissioner, divisional commissioner to arrive at the correct market value. The guidance values are general in nature and are for guidance only.The deputy commissioner/divisional commissioner have to determine the market value of particular property.They may call for information or records from any public office, officer, authority under government or local authority, examine and record statements from public, officer, authority under government or local authority.They may inspect the property in question after due notice to the party.Rules provide definite parameters to arrive at the market value, depending upon the nature of property, land house sites, buildings, and other properties.

In case of lands, the nature of land, such as dry, garden, wet, nature of soil, revenue assessment, other factors which influence the value of the property, value of the adjacent lands, annual yield for five consecutive years and nature of crops raised on the land are considered. In case of house sites, general value of house sites in the area,, proximity  to the railway, bus  route , road market, shops,amenities available,developmental and industrial improvements in the vicinity, property tax  valuation, any other  features influencing the value of site, and special features of the case as represented by the parties are guiding factors. In case of buildings, area of the land, plinth area, built up area, age of the building,materials used, locality, amenities provided, depreciation, property tax, how the building is used, rents received are examined. The appeal should contain, original or certified copy of the order against which appeal is made, original or certified copy of the document in question and memo of grounds of appeal.

The parties may after exhausting the appeal to the divisional commission, may prefer appeal in civil court.

Guidance Value 

The Government constitutes committees to prescribe certain guidance values for the properties located in different areas. These committees are called committees for estimation of property. The values published by the committee are guidance values for registering offices to determine the market values. They are the average values also. If the value of the property purchased is lower than the guidance value. The stamp duty and registration charges are payable on the basis of guidance value. If the market value of the property is more than the guidance value, the stamp duty is payable on market value.

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Advocate S Selvakumar

Property lawyers in Bangalore