Buying a residential plot in India: approvals and checks

The rule

Planning is a state matter, so the approving body and its name differ: a municipal corporation, a development authority, a town and country planning department, or the Collector outside town limits. The central rules that apply everywhere are in the RERA Act, the Transfer of Property Act and the Registration Act.

• Plotted projects are real estate projects. A “promoter” includes “a person who develops land into a project, whether or not the person also constructs structures on any of the plots, for the purpose of selling to other persons all or some of the plots” (RERA Act, s. 2(zk)(ii)).
• Registration before marketing. No promoter may “advertise, market, book, sell or offer for sale” any plot in a project in a planning area without registering it with the state RERA (s. 3(1)). Each phase is a separate project (Explanation to s. 3).
• Exemptions. No registration is needed where the land to be developed does not exceed 500 sq. m or the units do not exceed eight, inclusive of all phases; a state may lower this threshold (s. 3(2)(a)).
• What the promoter files. The application includes the “sanctioned plan, layout plan and specifications” as sanctioned by the competent authority (s. 4(2)(d)), and a sworn declaration of legal title to the land and that it is “free from all encumbrances”, or the details of the encumbrances (s. 4(2)(l)). These appear on the RERA project page.
• Advance limit. A promoter may not accept more than 10% of the cost of the plot as an advance or application fee without first entering into a registered written agreement for sale (s. 13(1)).
• Conveyance. The promoter must execute a registered conveyance deed in your favour and hand over the common areas to the association of allottees or the competent authority (s. 17(1)).

Land use and layout approval: Maharashtra as an example

The Maharashtra Regional and Town Planning Act, 1966 shows how the state layer works:

• “Development” includes the “lay-out and sub-division of any land” (s. 2(7)). Dividing land into plots is development.
• Inside a planning area, once a Development plan is in preparation, no person may “change the use of any land or carry out any development of land without the permission in writing of the Planning Authority” (s. 43).
• In a Regional plan area, permission to use land “for any purpose other than agriculture” or to develop it comes from the municipal body or planning authority, the village panchayat in the gaothan, or the Collector elsewhere (s. 18(1)).
• Penalty. Development or change of use without permission is punishable with imprisonment of one month to three years and a fine of ₹2,000 to ₹5,000, plus a daily fine of up to ₹200 for a continuing offence (s. 52(1)).

A plot carved out of farmland without permission is therefore not a buildable residential plot, whatever the brochure says. For farmland itself, see restrictions on buying agricultural land and conversion of agricultural land to non-agricultural use.

Step by step: checks before you pay

1. Find the project on the state RERA portal if a promoter is selling several plots. Compare the approved layout, plot number, area and completion date with the brochure. See RERA project registration check.
2. Get the layout approval from the seller: the sanctioned layout plan with its approval number and the authority that issued it. Ask that authority, or check its website, that the approval exists and covers your plot number.
3. Check the permitted land use. The land must be zoned or converted for residential use. In rural areas, ask for the non-agricultural use permission.
4. Check the title and the land records. The chain of registered deeds, the revenue record (7/12, khata, patta, jamabandi, depending on the state) and an encumbrance certificate. See title search and encumbrance certificate and mutation of property records.
5. Walk the boundaries with the survey sketch and the layout plan. Check access by a road shown in the approved layout.
6. Sign a registered agreement for sale before paying more than 10% to a promoter (RERA s. 13). A contract for sale “does not, of itself, create any interest in” the property (TPA s. 54), so do not treat it as ownership.
7. Register the sale deed and pay stamp duty: stamp duty calculator, property registration process. A document that must be registered and is not “shall not affect any immovable property comprised therein” (Registration Act, s. 49).
8. Apply for mutation in your name after registration.

Plot from an individual seller

A single plot bought from its owner, outside a promoter’s project, is not under RERA: the layout and title checks carry all the weight. Do not buy on a general power of attorney: see power of attorney sales and the law.

Tax on the purchase

A plot that is not agricultural land is “immovable property” for TDS: at ₹50 lakh or more, the buyer deducts 1%. See TDS on property purchase. Stamp duty is charged on the higher of the price and the state’s guidance value: see circle rate and guidance value.

Which professional to consult

A property lawyer (advocate) enrolled with the State Bar Council for the title and approvals (property lawyers); a licensed surveyor for boundaries; an architect for what you can build on the plot. This guide is general information, not legal advice.