Some questions on House Registration

[bdasites]

Hi,

A note before I start my questions: I have read about the moral/legal problems with registering at Guidance Value instead of the actual transaction amount. Currently, I am trying to understand the whole thing properly.

I came across a house in a BDA layout. I agreed on a price with the seller, but he doesn't want to register at more than 50% of the sale price. I am able to arrange ~42% of the sale price as cash. So, here are my questions:
1. What are the documents which I will come across during the whole purchase process? I know about Sale Agreement and Sale Deed. Are there any others?
2. As I understand, Sale Agreement is the document signed between buyer and seller stating the intent for sale. Is this the document which the banks use to sanction loan? Does this document show 100% of the sale price?
3. Is the Sale Deed the one which is signed when registering the property with the registrar? Are there any other documents created/signed during the actual registration?
4. Let us say we register at 50% of the sale price, how much amount does the Sale Deed show? How much amount does the Sale Agreement show?
5. If the Sale Deed shows only 50% of the sale price, how will the banks account for the entire loan amount (assuming they approve loan for 100% of sale price)
6. In my current situation, I am more than willing to pay stamp duty on the full sale price, but the seller is not willing to register at a higher value. Putting the moral questions out of the equation, what are the possible legal consequences (for both me and the seller)?
7. If the bank gives loan based on the sale price, how does the transaction happen? Does bank issue 2 cheques, 1 for registration amount and another for the difference amount? Are both cheques addressed to the seller? How do I pay my share (unapproved part 15-20% amount)? Do I pay cash/cheque to the seller? Or do I pay it to the bank who will include it in the cheques they create?

Thanks

[maheshv]

My answers inline. To make my explanation easy, i will use two term 'blank money' and 'white money'

1. What are the documents which I will come across during the whole purchase process? I know about Sale Agreement and Sale Deed. Are there any others?

I can thinking of following, other can add to the list
BDA allotment letter
Update to date tax paid receipt
Last 14 years EC
Approved Building plan
Latest Khata extract
Any preiovus sale deeds

2. As I understand, Sale Agreement is the document signed between buyer and seller stating the intent for sale. Is this the document which the banks use to sanction loan? Does this document show 100% of the sale price?

Yes - get the sale agreement registered for your safety
100% of sale price legally agreed b/w you and seller that is white money and this will be the price mentioned in Sale agreement and Sale deed
and
Not the full price you both agreed off the agreement, that is difference of white money and full agreement which will be black money

3. Is the Sale Deed the one which is signed when registering the property with the registrar? Are there any other documents created/signed during the actual registration?

Yes, yes
Get sign from seller on following transfer papers, since after sale you will not be able to locate him
1) Khata
2) Eletricity
3) BWSSB

4. Let us say we register at 50% of the sale price, how much amount does the Sale Deed show? How much amount does the Sale Agreement show?

You cannot go by saying 'let us say we register at 50%'. You will have to register, at minimum the price of guidance value. This value you can find out by going to sub-register office which handles registration for the location/area where the property in located.
You can register for higher value than guidance value but not for lesser. If it is found that property has been registered for lesser value than guidance value then both you and seller will be in trobule for avioding paying tax
Sale deed and Sale Agreement will show white money.

5. If the Sale Deed shows only 50% of the sale price, how will the banks account for the entire loan amount (assuming they approve loan for 100% of sale price)

Nationalised Banks don't take risk on your behalf , they pay 80% of registration value a.k.a white money. Think about this, if you default paying your EMI bank can legally only recovery the property value which you registered and took loan on.
Don't know/can't comment on Private Banks

6. In my current situation, I am more than willing to pay stamp duty on the full sale price, but the seller is not willing to register at a higher value. Putting the moral questions out of the equation, what are the possible legal consequences (for both me and the seller)?

Forget about seller, let's talk about you, since you are the one seeking help here
Say you pay seller 10lac as advance and in the sale agreement you show 2 lacs as advance (white money). There wont be any proof for remaining 8lac (blank money), in case Seller becomes 'unreachable' you would loose 8lacs
People do side agreement to cover the blank money, but that kind of agreement won't stand it's ground in court as it will be clear that both of you were trying to aviod tax in first place

7. If the bank gives loan based on the sale price, how does the transaction happen? Does bank issue 2 cheques, 1 for registration amount and another for the difference amount? Are both cheques addressed to the seller? How do I pay my share (unapproved part 15-20% amount)? Do I pay cash/cheque to the seller? Or do I pay it to the bank who will include it in the cheques they create?

Answer #5 answers the bank part.
For you, since bank pays only 80% of registration value(white money), you will have to pay the rest 20% in DD (white money)
and remaining blank money i am sure the seller will ask you to pay in cash for his safety

As you can see, there will be lot of unnecessary head ache here. Forget about moral/legal problem, ask yourself, if thinks go wrong do you have time and energy to run behind seller, court etc., to get your money back (i am assuming you are from middle class like most of us here on this forum). If you search bit harder you will find law respecting people like you, who will be ready to register for actual transacation value. Success of propety changing hands is very much dependent on similarity b/w buyer and seller.
If you are taking broker's service, you can set his expectation also same that you will register the property for transacation value.

I hope my answers help you.
Good luck!

[bdasites]

Hi maheshv,

Thanks a lot for your replies. I want to clarify a few things, and have some more questions
When I wrote 'Let us we register at 50% of transaction value', I was implicitly assuming that the 50% is above the guidance value. If I go ahead with this transaction, what legal implications can I expect?

It took a really long time for me to find this kind of a house, and the black money is the only problem. So, I am in two minds as to what to do...

[shubhamshak]

I will try to answer the questions objectively from my experience and try not to dwell on the moral/ethical angles. Those for for you to decide.

1. What are the documents which I will come across during the whole purchase process? I know about Sale Agreement and Sale Deed. Are there any others?

Those are the two apart from the legal documents pertaining to the property itself.

2. As I understand, Sale Agreement is the document signed between buyer and seller stating the intent for sale. Is this the document which the banks use to sanction loan? Does this document show 100% of the sale price?

There are three practices here - a) A sale agreement signed and witnessed on a 200 Rs. stamp paper
b) Sale agreement stamped at 1% of the transaction value or 20,000 whichever is less. This will be adjusted towards the stamp duty during registering of the sale deed.
c) You also have the option of registering the sale agreement itself by paying the full stamp duty. If the agreement is registered it will show up on the EC. However, it this is not mandatory in Karnataka.

AFAIK (a) has no legal bearing. However most of the private banks are happy with it (b) is what most nationalised banks insist to process your loan application. (c) Go for it for your peace of mind as the seller cannot enter into another agreement.

Now about your question of white and black - You will need a sale agreement for the value you intend to eventually register the property at. This needs to be submitted to the sub registrar at the time of registration of the sale deed. It is up to you and the seller if you want another agreement mentioning the full amount. Some private banks may also need this to give you two DD's.

3. Is the Sale Deed the one which is signed when registering the property with the registrar? Are there any other documents created/signed during the actual registration?

Yes. You may also have a equitable mortgage deed for the bank loan depending on the bank.

4. Let us say we register at 50% of the sale price, how much amount does the Sale Deed show? How much amount does the Sale Agreement show?

Sale deed will show 50% as will your sale agreement submitted at the time of registration. You will be paying the duty on this price. Any transaction outside of this between you and the seller and outside the purview of law.

5. If the Sale Deed shows only 50% of the sale price, how will the banks account for the entire loan amount (assuming they approve loan for 100% of sale price)

Nationalised banks will lend you only 80% of the white (i.e. registered value). However, most of the private banks will lend up to 80% of the marked value as decided by their panel. They will give you two DD's. One to be exchanged in the sub-registrar's office at the time of registration. Another one in the name of the seller.

6. In my current situation, I am more than willing to pay stamp duty on the full sale price, but the seller is not willing to register at a higher value. Putting the moral questions out of the equation, what are the possible legal consequences (for both me and the seller)?

Whatever you pay outside of the registered value is black money in the hands of the seller. He will not be paying capital gains tax on it and will not be able to legally invest the money anywhere.
From your side the only risk is that you may have to explain the large outgo of cash from your account to the taxmen if they decide to question you.

7. If the bank gives loan based on the sale price, how does the transaction happen? Does bank issue 2 cheques, 1 for registration amount and another for the difference amount? Are both cheques addressed to the seller? How do I pay my share (unapproved part 15-20% amount)? Do I pay cash/cheque to the seller? Or do I pay it to the bank who will include it in the cheques they create?

You can either pay the seller by cheque/DD or pay the bank and they will create two DD's. However, any cash transactions are not recognized by the bank.

Typical practice is to pay the cash (black) component only on the day of the registration and keep every transaction up to that point in white i.e. only cheque/DD. That way you will have all the proofs of payment to the seller.

[bdasites]

Thanks a lot @shubhamshak. Your answers and very clear and explanative.