Jinisha Peter was exploring buying her parents’property, which they wanted to sell. The 2 BHK fit the bill perfectly as she was aware about the project, its facilities and the neighbours etc. Also, as real estate purchases often have emotions connected, a reason behind this purchase was that she didn’t want to let go of the home she grew up in. The bigger problem was if she could legally buy her parents’ property as she didn’t want to end up in a property dispute with her siblings. The next problem was securing a home loan. Since she was buying her parent’s property, she was unclear if she could get a home loan in the first place. This query is not restricted to Jinisha and this guide talks about these queries in detail.
Is it legal to buy your parents’ property?
Yes. It is legal to buy your parents’ property as long as there are no inheriters to that property legally. For instance, you cannot buy a property from your parents in which your siblings also have equal rights. In case you are keen on buying, the legal way is to agree for a monetary negotiation and get a NOC from them before transfer of ownership.
What are the advantages of buying your parents’ property?
- By buying your parents’ property, you are reducing disputes related to inheritance in the family.
- Location and facilities familiarity
- Immediate transfer of ownership
- Due diligence will be easy
If your siblings are against your parents selling the property to you, can they contest against the sale?
If your parents have not created any will for a self-acquired property, then the property belongs to them and them only and this can be sold to anyone and children’s permission is not needed.
For instance, Uma Rao has two sons and a daughter. Uma Rao has still not formed any will and is wanting to sell a 3 BHK that he had bought a few years ago. He is free to sell this property who will pay him the market value of the property and transfer it in her name. No one can contest sale of the property.
How to buy your parents’ property?
- While it may be your parents’ property, when you go the legal way it’s important to follow all rules. As part of due diligence, check for encumbrances.
- Next execute an agreement of sale between your parents (seller) and you. This document makes it clear that the seller has agreed to sell the property to the buyer.
- Pay the token money and arrange for finances including home loan.
- Execute a sale deed between your parents (seller) and you (buyer).
- Register the transfer of ownership rights from the seller to the buyer.
- Pay a one-time stamp duty and registration charges as per the state regulations and include property in the government records. Note that this will be over and above the cost of the property and will not be part of the home loan that will be granted.
Can you buy your parents’ property by executing gift deed?
Any property purchase will require it to be legally registered in the government records and post this transfer of ownership takes place. For this stamp duty and registration charges have to be paid by the buyer. Now, some states give rebate on stamp duty if a gift deed is invoked for blood relations. To save paying the stamp duty, one may think of executing a gift deed where a very paltry amount of stamp duty has to be paid and that too by the donor (parents in this case). However, note that you cannot do any money transaction to your parents for a property acquired through gift deed.
- Thus, the parents may not be able to get the money for the property they intended to sell to their son/daughter
- No home loan will be sanctioned for such a property that cannot show any property transaction.
What are the documents required for buying your parents’ property?
Mentioned are documents that one has to be ready with while buying a property
Encumbrance certificate
This legal document certifies that the land has paid all its taxes, dues and doesn’t have any legal or financial issue to face.
Property tax receipts
This will include all annual property tax receipts paid by the owner till sale of the property.
No objection certificate (NOC)
This is a certificate that the seller has to secure from the housing society and give to the buyer. This is given when all dues such as electricity bill, pipeline gas bill, society maintenance charges etc. have all been cleared
General power of attorney (GPOA)
In case your parents are unable to be present during registration, they may handover the GPOA by mentioning the tasks that can be done under this GPOA.
Occupancy certificate
Occupancy certificate states that the project is fit for occupation.
Khata certificate
This legal document establishes legal ownership of the owner and is important for property registration, transfers and for utilities such as electricity, water etc.
Sale deed
This will include all details including seller name, buyer name, details about the property, transaction cost etc.
How to secure home loan for parents’ property?
Ownership: The legal property owner should be your father, mother or both (joint ownership).
Documents: You should be able to furnish all required documents for getting a home loan, including an income certificate, address proof, etc.
Loan eligibility: While you may get a home loan for the property, your eligibility depends on your income, credit score and stable employment.
Loan-to-value ratio: Home loan lenders give home loans on a specific percentage of the property’s value, that is, the Loan-to-Value (LTV) ratio. This ratio depends on the lender and the property’s location.
Can a home loan lender reject a home loan application if you are buying your parents’ property?
Home loan application rejection has no connection with the seller(s) blood relation with you. The dispersal of home loans depends on the institution and can be rejected if any of their criteria are not met.
Can your parents take back the property from you once you bought from them?
No. Once the property has been sold and the ownership has been transferred your parents cannot take back the property. For you to give it back to them, you have to again transfer ownership. This can be done by paying stamp duty and registration charges that the buyer (parents in this case) has to pay.
Housing.com POV
While buying a property, most people apply for a home loan. These are given by banks and non-banking financial companies. Both have their set of regulations for the dispersal of home loans. While inter-family buying and selling may be complex, if the property documents are in place and all other required proofs are available, getting a home loan for buying your parent’s property is a cakewalk.
FAQs
Is it legally possible to buy your parent’s property?
Yes. Buying your parents' property is similar to buying any other property from a seller and hence it is legally allowed to make the purchase.
Do you need to register a sale deed to buy parents’ property?
Yes, a sale deed is necessary to buy parents’ property. In case the property purchase is not registered, there may be problems related to inheritance in the future.
Do daughters and sons hold equal rights in their father’s property?
Under the Hindu Succession (Amendment) Act of 2005, daughters and sons have equal rights on their father’s property.
Is it possible for a child to take a home loan for buying a parent’s property?
Yes, in case the parents become co-borrowers or guarantors.
Can a home loan be transferred from father to son legally?
If there is a co-applicant along with the father then the loan will be transferred to him. In the absence of a co-applicant, a home loan has to be repaid by the son or daughter.
Can you buy your parents unregistered property?
Buying an unregistered property is a bad idea even if it’s your parents’ property. If you are interested in the sale, the first step is to register your parents’ property and then initiate your own property buying.
| Got any questions or point of view on our article? We would love to hear from you. Write to our Editor-in-Chief Jhumur Ghosh at jhumur.ghosh1@housing.com |
