How NRIs can use power of attorney for real estate transactions

[ecis2016.org] Many NRIs use an instrument called power of attorney (PoA) to conduct various legal transactions. We look at how this instrument works

The falling interest rates and the weakening rupee, have made real estate purchases in India an attractive proposition for NRI investors. While this may be a good time to find a suitable property and seal the deal, the Coronavirus pandemic will make it difficult for NRIs to travel to India to complete the transaction.

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Usage of power of attorney

Even before the COVID-19 crisis, travelling frequently was not an option for many NRIs, because of their jobs, busy schedules and even affordability. Consequently, a majority of them used the power of attorney (PoA) instrument, to conduct various businesses in the country of their origin. Under this legal arrangement, one can entrust anyone to represent them, in order to conduct specific businesses on their behalf. Even if the NRI is able to come back to India to make the purchase, at some point they have to hire a legal representative, for asset management purposes. Using the PoA instrument, an NRI can conduct various real estate-related businesses in India, including sale, purchase, renting, leasing, mortgaging, dispute management, etc. Also, if a property is jointly held, it might be difficult for all the co-owners to present themselves and complete a transaction. By way of granting a PoA to one person, the joint owners can get past any hassles.

Types of power of attorney (PoA)

There are three types of PoA – general power of attorney (GPA), special power of attorney (SPA) and durable power of attorney (DPA). Under a GPA, your representative is given general rights to make decisions on your behalf, while the SPA is granted to conduct specific businesses. A DPA, on the other hand, remains valid for the entire lifetime of the executor. Also, while the SPA loses its legal validity as soon as the task is performed, a GPA can be revoked by the executor as and when he wants.

How to draft a power of attorney deed?

You could make the draft of the content for the PoA on your own, but hiring a legal expert with specialisation in sale/purchase of properties involving NRIs, is preferable. Irrespective of who is doing it, be certain to include these details in the draft:

Your details: Name, age, overseas address, Indian address and occupation.

Your signature: The principal has to sign on each page of the PoA draft.

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Your representative’s details: Name, age, address and occupation.

Purpose of the POA: State the specific purpose for which the PoA is being created.

Validity period: The time when the POA comes into force and when it is terminated.

To give it a legal validity, the draft will now have to be authenticated by the local authorities.

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How to execute a power of attorney?

Depending on your availability, you could get the PoA executed in India or in the country of your current residence.

PoA execution in India

Step 1: Draft the POA on a non-judicial stamp paper of Rs 100.

Step 2: Visit the sub-registrar’s office in the area concerned, along with the legal representative and two witnesses. Each party must carry their ID proofs and photographs.

Step 3: The sub-registrar’s office will collect the PoA document, photos and fingerprints of each party, along with other papers and the stamp duty for PoA registration.

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Step 4: The registered POA could be collected on the due date. This could typically take a week.

Note here that the Indian Registration Act, 1908, doesn’t make it compulsory for a PoA to be registered. However, the Supreme Court, in 2011, ruled that registration of PoA is mandatory if it is executed for the sale of a property.

PoA execution outside India

In case you are in another country where you are a resident, you could get the PoA legalised though the Indian embassy in that country. There are two ways to do this.

Apostillisation: Under the provisions of the Hague Convention, 1961, the PoA draft must be verified by the local authorities in the country where you are currently living to give it legal authenticity. This process, known as apostillisation, would also ensure nothing prescribed in the draft is in conflict with the local laws. An apostille, also known as superlegalisation, is a legal certificate, which confirms and verifies the signature/seal of the person who authenticated the document. The deed must also comply with Indian laws, such as the Indian Registration Act, 1908 and the Power of Attorney Act, 1882. A stamp duty must also be paid to complete the apostillisation.

Legalisation: In this process, one has to get the deed notarised by a local judge or such authority and then get that judge’s signature authorised by the Indian embassy. This is important, because the notary would get a legal validity only after it is authenticated by an authorised officer of the Indian embassy. This is prescribed under Section 3 of the Diplomatic and Consular Officers (Oaths and Fees) Act, 1948. This PoA must be stamped and registered in India within three months of its execution. A stamp duty would be payable, according to Section 2(17) read with Schedule-I of the Indian Stamp Act, 1899, when the deed is presented for registration in India. The deed should be sent by a registered post to an Indian address.

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How to revoke a power of attorney?

As and when the executor thinks he must revoke the PoA, a due process has to be followed to perform that task. If the PoA was registered at the sub-registrar’s office, for instance, it has to be cancelled from there. A PoA is also revoked, when the grantor dies, becomes insane, or is declared insolvent.

Before revoking the PoA, the executor must inform all parties concerned and do the cancellation as per the terms and conditions specified in the document. This information must also be published in the local media, depending on the size of the property and impact of the decision. A notice in this regard should also be posted on the said premises, for informational purposes.

Important facts about power of attorney

• You have to be mentally stable to execute a PoA.
• A notarised PoA does not have legal validity as a registered PoA.
• The PoA loses validity after the death of the executor.
• A PoA executed outside India should be registered in India, to have legal validity.
• Any errors in the draft would render it null and void.
• You cannot transfer ownership of the property through a PoA.
• You have to provide an address in the country of your current residence in the PoA draft.
• Any misuse of the PoA by the attorney might land you in trouble.
• NRIs can ask their attorney to accept payment on his behalf. However, the attorney cannot receive the payment in his account.

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