Should you buy an unregistered property?

Buying a property is a big decision that involves huge investments. People generally make evaluation between under-construction, ready-to-move-in, and resale properties. Each one has its own advantages and disadvantages. A resale property is generally purchased if you are looking for a location where there are no new projects. Budget also plays a role here as these are typically a little cheaper than new ready-to-move in flats. However, a big risk that looms on resale properties is that many of them may be unregistered. In this guide, we will tell you the risks associated with such properties that may result into huge losses rather than any gain.

Check what happens when you buy a property not registered with RERA?

 

What is a resale property?

A resale property is purchased and put on sale by the buyer (present owner). A mistake people generally commit is opting for an unregistered resale property for a cheaper cost. This can be a costly affair with risks associated with it.

 

Registered resale properties vs unregistered resale properties

Registered resale property	Unregistered resale property
These properties are legally registered, and their records are with the government.	These properties do not have information recorded with the government.
Registration process involves payment of stamp duty and registration charges.	No such fees are paid.
The registration takes place after proper validation of the property in the sub-registrar’s office in the presence of the buyer, seller, and witnesses.	No such activity takes place. Hence, the validation of the property doesn’t occur.
Ownership is clear in registered properties.	Ownership is not clear in unregistered properties.
A property, which is registered, is protected under law in case of disputes.	An unregistered property is not protected under law in case of disputes.
These will not have any undisclosed liabilities as they must be settled before the sale and registration of the property.	These will have undisclosed liabilities which may trouble the property owner later.

 

Why should you not buy unregistered properties?

• Absence of ownership: In case of an unregistered property, there is no owner. This will lead to problems for the buyer in future as there is no owner of the property.
• Financing problems: As unregistered properties may not have proper documents, getting finances in the form of home loans is a tedious task.
• Encumbrances: As the title is not registered, these have many unpaid property taxes and other encumbrances that will also be the responsibility of the new owner.
• Difficult to sell: This property with no documents will be difficult to resell. The seller, if finds a buyer, may have to give it away as part of distress sale and can never get the market value the property commands if it was registered.
• Difficult to legalise: With no proper documents and previous ownership details, it will be difficult to legalise and register the property. This project will also involve spending a huge amount of money (which ideally the seller from whom you bought the property should have spent.)

 

Is it possible to get a home loan for unregistered properties? 

While you may get a home loan for unregistered properties, getting them is not easy like in the case of registered properties. While disbursing home loans for properties, banks follow a standard operating procedure (SOP), which cannot be followed in case of unregistered properties. Thus, they apply far more stringent measures in case of unregistered properties.

• Enquire with banks/financial institutions if they disburse home loans for unregistered properties.
• If you get a loan from any financial institution, it will be less than the loan that a registered property gets. Hence, you will have to make a higher down payment.
• They will also be charging a higher rate of interest on loan of your unregistered property than on properties registered.
• Financial institutions may ask for extra guarantees against loan amount in the form of some of your assets, co-signers, guarantors, etc.

 

How to establish ownership of unregistered property?

• Find out the previous owner of the property. In case, the owner has passed away, find the legal heirs, and get them to execute a sale deed in your name.
• If the previous owner refuses to execute a sale deed, you may have to file a declaratory suit that should mention that the property belongs to you/your father/your ancestors had paid the full consideration and stamp duty for the property, but seller didn’t visit the SRO to register the property and transfer the ownership.
• Finally, if you are living in a property for more than 12 years and no one claims the property, you can submit a legal application stating that you have been staying here and under adverse possession, the ownership rights should be transferred to you.

 

Housing.com POV

Buying an unregistered property may look to be a smart purchase as you may save money, but it may bring in a lot of legal problems, which will prove to be costly and stressful. It is recommended to not invest your money in a property not registered as you will not have a legal proof of ownership for that.

 

FAQs

Can one sell a property not registered?

Yes, one can sell a property not registered but it cannot be transferred under the buyer's name legally due to absence of legal records.

Is the transfer of ownership recognised in case of unregistered properties sale?

No. In case of properties not registered, the transfer of ownership is not done.

What is the validity of an unregistered sale agreement?

The validity of an unregistered sale agreement is three years from the execution date.

Is it mandatory to register a sale agreement?

Only when the sale agreement is registered, it will be valid in the court of law.

Can unregistered property documents be admitted as evidence during a property dispute?

No, unregistered property documents cannot be admitted as evidence during a property dispute.

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