How to cut corners on purchase of property

Buying a house is a big investment for most people and the financial burden can be huge. However, some states provide relief in the form of lower stamp duty rates for women buyers. These include Delhi, UP, Haryana, Madhya Pradesh and Punjab.

In these states, if a property is purchased in the name of a woman, the prescribed rate of stamp duty payable on the sale deed is lower compared to that applicable to others, such as a male buyer, a company or a partnership firm.

For instance, for a flat in Delhi that costs Rs 1 crore, the stamp duty for a man would be Rs 7 lakh.

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For a married couple it would be Rs 6 lakh and for a woman buyer it would be Rs 5 lakh. Hence, registration in the name of a woman will reduce the household stamp duty burden.

Buyers should make use of the rebate, especially when the house is for self-occupation, says R R Singh, director general, National Real Estate Development Council.

However, other factors need to be kept in mind before taking such a step, says Vivek Kohli, senior partner, Zeus Law Associates.

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He says, registering the sale deed in the name of a woman merely to take advantage of lower duty makes sense only if the property is being purchased as investment and the buyer has definite plans to dispose it of within a few years.

Imagine a situation where the father purchases the property and registers it in the name of the daughter. There are chances the other legal heirs (the sons in this case) might not agree. However, these issues can be sorted out through proper estate planning.

According to Muddassir Zaidi, regional director (north), Knight Frank, India, instances of property being registered in the name of women are high among those who buy these solely as investment. About 80-85 per cent of such buyers buy the property in the names of their wives or daughters.

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Such buyers hold the property for two to three years before selling it. "Since the property is registered in the name of a close family member (wife or daughter), the buyer has control over the property," Zaidi says.

Buyers must also consider the source of payment. For instance, if the property is registered in the name of the wife or daughter who is not employed, queries could arise about the source of funds. Besides, if a loan has been availed to buy the property, the borrower can claim tax exemption only if he is the owner.

Also, if the property is purchased for leasing out, then the person in whose name it is registered will have to pay tax on the rental income.