What this covers: Comprehensive due diligence checklist for institutional investors, HNI buyers, and private equity funds acquiring Indian commercial or large residential real estate. Organises title, regulatory, construction, financial, and legal risk areas into actionable pre-purchase verification steps.
Statutory framework: Transfer of Property Act 1882; Registration Act 1908; RERA 2016; Land Revenue Acts (state-specific); Companies Act 2013 (for corporate buyers); FEMA/FDI regulations (for cross-border); Income Tax Act 1961.
A. Title Due Diligence
Chain of title for at least 30 years: Verify each transfer through registered conveyance deeds; missing link in chain is a red flag.
Encumbrance Certificate (EC): Obtain EC from the Sub-Registrar for the last 30 years. Verify no charges, mortgages, liens, or lis pendens.
Mutation records: Verify the property is mutated in the seller’s name in local revenue records. Non-mutation is a significant defect.
Survey records: Match physical dimensions and boundaries with survey settlement records. Ground truthing with a licensed surveyor recommended.
Power of attorney chain: If any transfer is via POA, verify the POA was registered, not revoked, and the donor had capacity.
B. Regulatory Due Diligence
RERA registration: If an ongoing project, verify RERA registration number and status; obtain project details from state RERA portal.
Change of land use (CLU): Verify land use matches intended purpose, residential, commercial, mixed, via master plan and zoning certificate.
Building plan approval: Obtain sanctioned building plan and Commencement Certificate (CC) from the competent authority.
Completion Certificate / Occupancy Certificate: For completed projects, verify OC was issued. Buildings without OC carry significant risk of future regularisation issues.
Environmental clearance: For projects above thresholds under EIA Notification 2006, verify environmental clearance; challenges by local residents are common.
Heritage / Coastal Regulation Zone (CRZ) restrictions: If property is within heritage precinct or CRZ, verify compliance with specific restrictions.
C. Construction / Physical Due Diligence
Structural audit: Engage a structural engineer to assess building condition, particularly for buildings over 25 years old or with visible distress.
Compliance with approved plans: Verify constructed building matches the sanctioned plan (floors, FSI utilisation, setbacks). Deviations may invite penalty or demolition.
Basement and parking compliance: Unauthorised basement construction or parking violations are common in metros.
Common area specifications: For residential, verify common area specifications match marketing brochures and RERA disclosures.
Defect liability: For recent completion, preserve the promoter’s warranty period (5 years under RERA Section 14(3) for structural defects).
D. Financial Due Diligence
Outstanding taxes: Verify no arrears of property tax, water tax, sewerage charges, or utility bills.
Maintenance society dues: For apartments, obtain no-objection from the housing society and verify all maintenance dues are clear.
Loan and mortgage status: If seller is corporate or promoter-owned, obtain no-objection from the lending bank confirming no charge exists.
Capital gains tax position: Assess buyer’s and seller’s capital gains tax position; plan for Section 54F or Section 54EC exemptions if applicable.
Stamp duty and registration charges: Factor state stamp duty (3-10% depending on state and property type) and registration (1-2%) into total cost.
E. Legal Due Diligence
Pending litigation: Search SCC Online, Manupatra, court cause-lists for any litigation involving the property or seller. Interim injunctions are particularly serious.
Tenancy and licence: Identify any subsisting tenants, licensees, or occupiers. Under the Rent Control Acts of many states, tenants have protected status that burdens the buyer.
Easements and rights of way: Inspect for existing easements, rights of way, or neighbours’ rights that might restrict development or use.
Family and succession issues: For Hindu Undivided Family (HUF) or ancestral property, verify all coparceners have consented; without this, the transfer is voidable.
Foreign Direct Investment (FDI) compliance: For non-resident buyers, verify FEMA compliance; agricultural land and plantations have restrictions.
Benami Transactions (Prohibition) Act 1988: Ensure the purchase is in the real beneficial owner’s name; benami transactions can result in confiscation.
F. Post-Transaction Compliance
Mutation: Apply for mutation in buyer’s name in revenue records within the state-prescribed time (typically 30 days).
Registration: Register the sale deed within 4 months of execution (extendable with penalty); under-registration invites severe consequences.
TDS under Section 194-IA: If sale consideration exceeds INR 50 lakh, buyer must deduct 1% TDS and deposit with Income Tax Department.
Annual compliance: Property tax, RWA dues, utility bills, set up for regular payment.
This resource is for general information purposes only and does not constitute legal advice. For advice on your specific situation, seek appropriate professional counsel.