Buying NRI house via Power of Attorney? Read this

A PoA is not an instrument of transfer with regards to any right, title or interest in an immovable property. It is only a creation of an agency whereby a person authorises another person to do the acts on his behalf.

Precautions needed

A PoA is not an instrument of transfer with regards to any right, title or interest in an immovable property. It is only a creation of an agency whereby a person authorises another person to do the acts on his behalf. A PoA executed by an NRI requires extra precaution as the seller does not reside in India. A small lapse or callousness can land the buyer in deep trouble. The best way is to ask the NRI seller to be personally present at the time of registration of the property. However, in case that is not feasible, and you have to do it through PoA, then you must take the following precautions.

Don't notarise but register power of attorney

There have been cases where a PoA holder simply notarises the instrument instead of registering it. A notarised PoA is different from a registered PoA and a notarised PoA is legally not valid in India. A PoA executed by an NRI on foreign soil should be registered in the sub-registrar's office and should also be attested by the Indian Consulate/Embassy concerned. It should be used within three months from the date of its execution.

Single PoA holder

One should also check that that there is a single PoA holder. There have been numerous cases of frauds where the same property is sold to different people by different PoA holders.

Check for crucial clauses

One must check in the clauses that the title of the property is clear, i.e., the principal's name is reflected as the owner in revenue records.

Check for photographs and signatures

One should also check that the signatures and photographs of principal and PoA holder are also affixed on the document. If the NRI seller is unable to make it to India for the sale of the property due to some valid reason, the buyer should insist the NRI seller to include the said reason in the PoA. In short, the reason for the execution of the PoA should be clearly mentioned in the document.

Check for its validity

Ideally, the PoA should not be very old and if it is, then one must ask for a fresh PoA or confirmation from the owner if it has been terminated or not. In case, the instrument is time-bound, then, the prospective date of termination of the PoA and if there is no mention of the time-limit then the same must be mentioned in the document.

Transfer money to NRI owner only

A buyer should understand that the power of attorney holder is only a representative of an NRI seller. The resident Indian buyer should make payment only to the NRI seller in their NRE/NRO account. An NRI seller can authorise a PoA holder to accept payment on his behalf but cannot authorise payment to the PoA holder. Even if the NRI seller authorises the PoA holder to receive direct payment, the buyer should avoid such property transactions. It may land the buyer in tax trouble.

Indemnity clause in sale deed

Every property transaction is exclusive. Therefore, a buyer should safeguard his/her financial interests by including a blanket indemnity clause in the sale deed. One must ensure that the sale deed clauses are in accordance with the terms and conditions of the PoA to remove any possibility of legal or tax issues at a later stage.

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