The arcana of buying land

I hear many -often, young people- say, “I will buy a small piece of land and take to growing trees or growing crops or whatever”. The wish to get back to land is compelling and frequent. I succumbed to that once, 26 years ago and having seen a patch go green, have begun again with another bare lot.
I thought setting down my experience of the legalities of buying land might be of use to wannabe homesteaders.
I will not get into what you must look for in the kind of land you buy or what you must do with it. Obviously that’d be the stuff of your dreams. I will restrict this post to the legal, procedural details of acquiring a title to a parcel of land. My experience is restricted to the state of Tamil Nadu and its laws as of today. But I think the procedures will be similar all over India.
One major law to consider is that many states stipulate that ‘outsiders’ may not buy agricultural properties. In Karnataka and Maharashtra [- my information is based on hearsay], only agriculturists may buy agricultural land. In J&K of course, outsiders may buy no property of any kind. [It will be useful if readers from various states leave their knowledge as comments at the bottom of this post]. In Tamil Nadu there are no restrictions as long as one is an Indian citizen.
Now let’s turn to the detailed choreography. If you are urban-quitter, rarely will you be dealing with a land-owner directly. There will be the land agent or broker. These are usually local young men or village leaders. At every bus stop of a village within 50 km of a town or city in Tamil Nadu, you can ask for and find a broker who will happily brief you on properties on sale. Currently in Tamil Nadu, a buyer pays 2% of the deal as brokerage and the seller, 1%. But this is negotiable and if it’s a isis deal, a lump-sum is often agreed. No advance is usually sought or paid. For this the broker does a lot of running around. His tools of trade are his contacts, good knowledge of procedures, a bike and a cell phone. And great charm and wit. Let us fast forward to the stage where your soul has fallen for a piece of land and your wallet has consented on the price. What happens next? The paper chase begins.
The first thing is to get yourself a real-estate lawyer and give him some basic data on ownership, like the official village name and number, the name of the owner and the survey number of the property. He’ll give you a checklist of papers to get and you will be working the broker’s phone for weeks.
Start by ensuring that there are no encumbrances on the land. That is, it has not been pledged or delegated or already sold to someone else. You ascertain that by applying for an Encumbrance Certificate [EC] at the nearest Registrar of Land records. This process has been computerized in Tamil Nadu and usually by correctly specifying the property you should get an EC the same day. The EC is applied for a minimum of 15 years or if your lawyer so advises for upto 30 years. After 30 years, possessor of the land is legally superior to the title-holder.

5 thoughts on “The arcana of buying land

  1. I think it is an interesting information that I have read. Thanks to let me write a comment in your page.

    HazelI

  2. I have gone thru identical issues in buying land near Denkanikottai. I am also stuck at the last stage where it is taking forever to get the Khata transferred. It has been 2 months since I applied for the same, it is being postponed every day with some odd reason or the other. Am wondering how much longer it will take to get the same.

  3. Hello ira…

    I’d like others to come in on your query with more authoritative expansion with relevant citations. I have only the counsel of my lawyer who is also a Chartered Accountant with many NRI and foreign clients.

    He says, only Indian citizens [which includes NRIs, of course] are allowed to buy land – not just agricultural. Foreigners after a certain number of years residence, and with proof of ‘real need’ are allowed to buy a reasonable size of land for residential purposes only. I further know [-by hearsay] that companies with controlling foreign equity cannot own agricultural land [- industrial, residential land, yes]. That is to say, foreigners can own equity in companies that own non-ag. land.

    Laws are constantly changing and the government in search of the Holy Grail of 10%+ growth may well have thrown open the whole country to all comers.

  4. Nice post.

    Am intrigued by your assertion “One major law to consider is that many states stipulate that ‘outsiders’ may not buy agricultural properties …In Tamil Nadu there are no restrictions as long as one is an Indian citizen.In Tamil Nadu there are no restrictions as long as one is an Indian citizen”

    What is the basis (please cite relevant central or Tamil Nadu law) for the assertion above that it is only Indian citizens that are permitted to buy agricultural land in Tamil Nadu?

    I am familiar with the provisions of a central law called FEMA. Per FEMA, a resident of India, even if he or she is a US citizen, is not prohibited from buying agricultural land in India. However, FEMA prohibits even an Indian citizen who is not resident of India, from buying agricultural land in India.

    I would like to know the source (preferably authoritative and not mere hearsay) of your information that only Indian citizens are allowed to buy agricultural land in Tamil Nadu.

    Thank you.

    Please feel free to send a reply to r2iira@yahoo.com

  5. DV,
    This is really useful , Ramesh and I have been asking around about the modalities of buying land and also restrictions regarding non-agriculturists buying agricultural land etc etc…
    We will wait for the rest of ur article and have many more questions
    devi

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