Blog Details

Transfer of immovable property involves a change in ownership of the property being transferred. A transfer can happen in two ways, by act of parties, or by operation of law. This article enumerates the modes of transfer by act of parties, under the Transfer of Property Act, 1882 (“the Act”).

What is immovable property?

While the Act does not define what “immovable property” is, it specifies what is excluded, namely, standing timber, growing crops or grass.

Definition of immovable property in other legislations:

a)General Clauses Act, 1897: Section 3(26) - “immovable property” to include land, benefits to arise out of the land, and things attached to the earth, or permanently fastened to anything attached to the earth. 

b)The Registration Act, 1908: Section 2(6) - "immovable property" includes land, buildings, hereditary allowances, rights to ways, lights, ferries, fisheries or any other benefit to arise out of the land, and things attached to the earth or permanently fastened to anything which is attached to the earth, but not standing timber, growing crops nor grass.

Who is eligible to transfer Immovable property?

- A person who is competent to contract; and

- Who is entitled to transferable property (this could also include persons authorized to transfer on behalf of someone else, like a power of attorney)

The transfer can be of the whole or part of the property; and can be absolute or conditional.

What makes property transferrable?

1)      The transferor must be a living or juristic person. Any person who can sue and be sued can transfer immovable property.

2)      The transfer must be through conveyance, which takes place by creation of new title in the transferee for the property being conveyed.

3)      The property itself must be transferred.

4)      The transferee must be a living or juristic person.

Any immovable property, except those specified under Section 6 of the Act can be transferred.

Modes of transfer:

1)      Sale:

Sale is defined under Section 54 of the Act and involves “transfer of ownership for consideration”. The rights and liabilities of the parties are provided in Section 55 of the Act. A sale deed must be compulsorily registered and stamped. Once a conveyance deed is executed and registered, the transferee gets the ownership and possession of the property. The tax implications vary based on the nature of transaction and property being transferred.

2)      Mortgage:

Section 58 of the Act defines mortgage as a “transfer of interest” in immovable property for securing repayment of money advanced or to be advanced. The owner of the property who creates the lien is the mortgagor, and the lender is referred to as the mortgagee. Mortgage can be through various modes, namely:

-          Simple mortgage

-          Mortgage by conditional sale

-          Usufructuary mortgage

-          English mortgage

-          Mortgage by deposit of title deeds

-          Anomalous mortgage

If the mortgagor deposits the title deeds as collateral for repayment of the loan, a mortgage is established by virtue of the deposit and is known as a "mortgage by deposit of title deeds” and does not require registration. However, if this mortgage is reduced to writing, then it has to be registered.

In a mortgage by conditional sale, the mortgagor ostensibly sells the property on the condition that:

-          on default of payment by a certain date, the mortgage shall become absolute; or

-          on such payment being made, the sale shall become void; or

-          on such payment being made, the buyer shall transfer the property to the seller.

3)      Lease:

Lease is defined under Section 105 of the Act to mean a “transfer of right” to enjoy the immovable property

-          for a certain time (express or implied) or perpetuity, and

-          in consideration for a price paid or promised.

A lease of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent must be registered and stamped. For all other instances, an oral agreement along with the transfer of possession is considered adequate.

When creating a lease, it is important to clearly state whether the property will be used for residential or commercial purposes. The modes of determination of lease are provided in Section 107 of the Act. During the term of lease, the tenant has exclusive control over the property and may sublet the premises to a third party unless expressly forbidden or restricted by the lease deed.

4)      Exchange:

Exchange is defined under Section 118 of the Act and refers to a transaction when two persons mutually transfer the ownership of one thing for the ownership of another. An exchange can be made only in manner provided for the transfer of such property by sale. An exchange deed must be registered and stamped. The tax implications vary based on the properties exchanged.

5)      Gift:

Section 122 of the Act defines gift as the transfer of (movable or) immovable property voluntarily and without consideration. Section 123 of the Act states that for a gift of immovable property, the transfer must be effected by a registered instrument signed by or on behalf of the donor and attested by at least two witnesses. The acceptance of the gift by the donee must be done during the lifetime of the donor, for the gift to be valid.

A donor cannot revoke or cancel a registered gift deed, unless a provision to that effect is mentioned in the gift deed. A conditional gift deed under Section 126 of the Act is when the parties agree that the gift shall be suspended or revoked on the happening of a specified event which does not depend on the will of the donor.

 Transfer by way of gift within blood relations is generally exempt from tax (subject to conditions). However, income accrued from the gifted assets may be taxable.