The arcana of buying land

Let’s take stock of the story so far. You have defined the property, established it in geography, determined who owns it and who we need to deal with [Agreement, POA or title holder]. You have agreed on a price and a time frame in which the deal will be concluded.
Let us backtrack a bit on the ownership. If there is no POA or agreement at large, you will probably deal with several people in case of an inherited property. These will be all the legal heirs – father, his sons and [if inherited after 1979] daughters and all minors. All these must be signatories to the sale deed and must be so named in the document your lawyer will prepare.[As a corollary, any valid POA or Agreement should also have been executed by all these]
Let’s get honest now and talk about the sum named in the document and the sum actually paid for the deal. There is a lot of unaccounted money sloshing around in land deals, in order to avoid the registration charges [9% in Tamil Nadu for agricultural property]. For one, I think the 9% rate is reasonable and for another there is no capital gains tax for the seller on sale of agricultural land. Muck is usually because, the buyer who has black money to get rid off and so wants a lower sum to be named in the document. Sometimes, the key-person on the selling side wants a lower sum cited; maybe because he wants the real transacted sum concealed so he can keep the bigger share for himself or a POA holder may have a delicate tax position.
Whatever the case, the situation is tricky for an honest-joe with a weak stomach for such deals. You may want to play straight on principle or you may have to account for the often huge sums involved in your books. You may be drawing big money from a bank account and may need to sign a statement -like I had to- as to how it is to be used.
What do you do? One neat advise I followed was to cite a sum in the document [-which cannot be lower in any case, than what is known as the “guide line value” for that particular survey number and obtained from the registrar’s records] and pay the difference as development cost and obtain a stamped receipt from the seller. This is what I did for pointReturn’s 17 acres and that is the truth, come what may.
Your lawyer will prepare a draft document in Tamil and it can be circulated among all concerned. On approval, the stamped document is prepared. A date for registration is agreed upon and everyone converges upon the registrar’s office. If it is in the outskirts or near a big city [-like Madurantakam, in pointReturn’s case], it will be buzzing with activity. Brokers, lawyers, document writers, clerks, buyers, sellers, refreshment vendors, friends, idlers and the like will be milling about. Set aside the better part of the day and take a lot of water and much to munch. [I was there for 5 hours on July 31, 2006 midwife-ing the pointReturn deal]. Be of sturdy bladder as well.

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.


  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

  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

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