Buying a Property from an NRI Seller through PoA

Buying a Property from an NRI

When buying a property from an NRI (non-resident Indian), you, as the buyer, should have a thorough knowledge of PoA to ensure a smooth and secure transaction. A Power of Attorney (PoA) is issued by NRI if he/she cannot be physically present in India for the execution of property transactions.

Normally as a buyer or seller, one should insist on the physical presence of the NRI Buyer/Seller in India for the sale deed to avoid any future hassles that may arise. The risk is greater if the buyer is a Resident Indian, and Seller is NRI, who is represented by the Power of Attorney holder.

Scrutiny on Buying a Property from an NRI

A property transaction executed by NRI through Power of Attorney calls for extra scrutiny. A sale deed can be declared null & void because of errors in the execution of Power of Attorney by NRI. These errors could be intentional or unintentional. In many intentional cases, the status of NRI is concealed in POA to avoid TDS. An NRI executing POA in India cannot declare his/her status as Resident Indian.

Generally, Resident Indians are not aware of the legal aspects of the Power of Attorney executed by NRI. Even professional help does not help in most cases due to a lack of knowledge.

Though it is equally important if a seller is a Resident Indian, and the Power of Attorney holder represents the NRI Buyer, tracing of money trail from NRI Seller’s case becomes difficult in cases of fraud.

Reason for Execution of Power of Attorney

The presence of an NRI seller in India for the execution of the sale deed is an ideal option. But if circumstances do not permit, as a buyer one should check the reason for the execution of Power of Attorney. If the buyer is convinced, the purpose/reason for the execution of a power of attorney should be clearly mentioned in the Power of Attorney.

Steps in Executing POA

The execution of a Power of Attorney (POA) involves two steps.

• The first step is to get the POA attested at an Indian Consulate/Embassy.
• The second step is to register the POA in India.

The attestation of POA is mandatory, even if the seller is not an NRI and has not completed 180 days outside India. However, if an NRI executes a POA on Indian soil, attestation is not required. These steps are crucial to ensure that the PoA is legally binding and can be used in transactions related to the sale or transfer of property.

Transaction Payment

Payment towards property transactions should not be transferred to the PoA holder.  The power of Attorney holder is only a representation of an NRI seller. The resident Indian buyer should make payment only to the NRI seller in his/her NRE/NRO account. An NRI seller can authorize the PoA holder to accept payment on his behalf but cannot authorize payment to the PoA holder.

In the case of multiple NRI sellers, the payment should be transferred in the proportion of ownership in the property to each seller.

Indemnity Clause

A buyer can safeguard his/her financial interests by including a blanket indemnity clause in the sale deed. It is also advisable to ensure that sale deed clauses are in concurrence with the terms and conditions of the POA to avoid any possible legal/tax hassles.

Checklist for executing a POA:

• NRI seller creates two copies of the Power of Attorney with detailed terms and conditions. As a buyer, one should go through each and every clause thoroughly to understand the content.

• The buyer should check whether the PoA is signed by two witnesses present in the country of residence of a seller.

• Check whether the witnesses were physically present in Indian Consulate/Embassy at the time of signature or not. If they were not physically present, then their signatures should be attested by the Local Notary.

• The PoA should be attested by the Indian Consulate/Embassy.

• The Attested POA should be registered in India by the resident Indian i.e. PoA holder. The registration process in India should be completed within three months from the date of execution of the PoA. The PoA can be registered in SDM (Sub Divisional Magistrate) office or Sub-Registrar Office.

• The relation between the NRI and PoA holder should be mentioned in the PoA. Preferably the details of ID proof of a POA holder issued by Govt of India should be specified in the PoA. The buyer retains the original copy of the Power of Attorney for future reference.

It is also important to note that in some cases a POA holder simply notarizes the PoA in India instead of registering it in the Sub-registrar office. A notarized PoA is legally not valid in India. A PoA executed by NRI on foreign soil should be registered in SDM or Sub-Registrar office.

NRIs can manage their Properties in Telangana using the Power of Attorney