Power of attorney property deal ban: Co-operative flat owners frowning

NEW DELHI: C K Rejimon, a resident of Dwarka, says that around 300 societies in the area don't have a completion certificate yet. "In such a scenario, how can owners get a clear sale deed without resorting to a general power of attorney," exclaims Rejimon. The Supreme Court order that came out in October has already impacted property prices in Dwarka, with rates going down. The circular by the Delhi government that came out earlier this week is the final nail in the coffin for many, say local property dealers.

Mukesh Singh, a broker operating in Dwarka, says, "All DDA units are leasehold properties. These need to be converted to freehold before they can be registered. However, a large amount of owners in co-operative housing societies are GPA owners. All of them will be impacted by this order." Singh says that while many have converted to freehold over the past few years, a sizeable number still have GPA.

Rejimon says that the SC order has already resulted in cancelled deals. "In Navsansad Vihar in Sector 22, for instance, a man had to cancel the deal as he couldn't get a loan. The GPA was not recognized by the bank, so he ended up cancelling his purchase," says Rejimon.

"Without freehold, you cannot execute sale deed unless you take permission from DDA. And while granting that permission, they charge 'un-earned increase'," says Amit Gupta, an advocate specializing in property matters. "In case of conversion of societal flat into freehold, DDA first insists on completion certificates. In the absence of completion certificates, they insist on D-forms. If those are also not available, house tax assessment papers, along with electricity connection, can be used for conversion." He adds that DDA had announced a policy according to which they permitted sale through agreement to sell and GPA in place of sale deed. "On the basis of such transfers, they even converted property into freehold in the name of the purchaser," he says.

Now, the complete ban on sale-purchase of leased property has left flat-owners with two options - conversion or applying to the DDA for permission to sell upon payment of "un-earned increase" which, he says, is a "hefty amount".

Anshuman Magazine of CBRE South Asia, an international property consultancy, says that in many cases, owners have no choice but to use GPA to transfer. He referred to cases where buyers have bought flats, believing that the developer will eventually procure a completion certificate. If the developer fails to get one, the flats bought will not be freehold and the buyers - now owners - will not be able to transfer them. In these situations, owners have had to use GPA. "I feel this will affect the residential market more. There are a lot of people buying apartments and into housing societies now," adds Magazine.

GPA-based sale transactions have been the norm in Delhi for some time now. It was only in September 2001 that DDA made it mandatory for GPA to be a registered document for the property to be mutated. Conversion to freehold, or mutation, becomes a necessity for registering the property, and selling it off later on.