Valuation of immovable properties owned under general power of attorney (GPA) might fall by about 20 percent as the Supreme Court has declared the sale of properties through this deed illegal, industry experts said Friday.
However, the Apex Court’s decision would not have any adverse impact on big organised developers and rather they could have some benefit in short-term.
“We do not purchase land and sell flats through power of attorney. So, we will not have any impact from Supreme Court’s decision,” Confederation of Real Estate Developers’ Association of India (CREDAI) Chairman Pradeep Jain said.
The decision would have an impact on transactions in the secondary and resale markets, said Jain, who also heads Parsvnath Developers.
Earlier this week, the Apex Court had ruled that sale transactions carried through GPA would have no legal sanctity and immovable property can be sold or transferred only through registered deeds.
Leading property consultant JLL India CEO (Business) Sanjay Dutt said, “Property transactions through power of attorney will virtually come to a halt. Over a period of 2-3 months, people who are really desperate and keen to sell, they will see the value getting eroded by 20 percent.”
Pointing out that transactions through GPA is prevalent in old and unauthorised colonies of metro cities, Dutt said Delhi and other state governments would have to come out with a long term policy either to convert GPA into freehold or some alternate solutions.
Asked about impact on developers operating in organized market, he said, “Almost the entire portfolio of big developers would not have properties with general power of attorney title.”
However, Dutt said, “Small developers operating in some location of city who generally sell builder-floors would be hurt from this decision.”
Jain and Dutt also noted that big developers could benefit from this decision with investors putting money in properties with better and clear title.
“Real estate transactions are set to become a lot more transparent with the Supreme Court ruling curbing the sale of immovable properties through power of attorneys,” Royal Institution of Chartered Surveyors (RICS) South Asia Managing Director Sachin Sandhir said.
The ruling which clamps down on such sales will not only help curb evasion of duties, but also limit the amount of black money in the real estate sector, Sandhir added.
