How Do Branded Real Estate Developers in India Ensure Land Title Security?

Buying land is more than finding a great location and agreeing on a price. For land that has changed hands over decades, the ownership history can be long and may include multiple sale deeds, inheritance, partitions among family members and mutation entries.

That is where land title security becomes important.

Disputes over the title to a parcel of land can cause huge problems for branded real estate developers: potential additional costs, delays and possible denial of finance. Homebuyers need to know whether the developer who is selling them a property has proper entitlement to sell it and whether that entitlement will be transferred to them.

Therefore, many branded property developers go for several checks before acquiring land to add to a project. First, they check the history of ownership of the proposed plot, followed by searches of government databases relating to the land, and checks of any restrictions on land use. They also search for litigation and review relevant disclosures and records available from the authorities. The checks are also verified by an independent lawyer.

1. Tracing the Complete Chain of Title

A developer’s legal team needs to investigate how the current owner came to own the land and all of the previous transfers. This can involve a large amount of documentation and even go back decades for some properties.

The objective when conducting a search into previous ownership is to try and establish a continuous chain of ownership of a property.

For example, the present owner may have acquired the land through a sale deed. His vendor would have acquired the land in a different manner. This could be by way of a sale, by way of a gift, by way of partition, by way of inheritance, etc. Each of these transfers would be by way of a separate document.

A professional Title Search Report (TSR) collates this information to identify matters that need further investigation, highlighting any gaps or inconsistencies in the information available.

For this reason, it is also important for buyers of land to find out about all of the documents relating to the land before they buy it. The latest document may look in order, but it does not necessarily reveal the events that took place before it.

2. Checking Encumbrances and Revenue Records

Even if a person has a valid document to prove ownership, there can be other claims against the land.

A developer generally verifies available encumbrance records and obtains the relevant Encumbrance Certificate (EC), where applicable. The developer also checks revenue records against the title documents.

These may include the 7/12 extract, Khata, Patta, Record of Rights and mutation entries, depending on the state.

Check that the names, survey numbers, land area, etc., are the same in all records.

Land administration in India varies from state to state. How these variations affect the classification of land, restrictions on ownership, registration and permission for development, etc., is elaborated in the HOABL guide to Land Laws of India.

While an EC can provide comfort to a buyer, it is not enough for a complete title check. All documents that are required under the law must be examined, and a check must be made as to whether necessary records have been created for the property.

3. Confirming Land Use and Development Rights

Having clear ownership of a plot does not automatically allow its development.

Development must comply with the permitted land use and applicable planning requirements. These may classify land for agricultural, residential or other uses, and the proposed development must be consistent with the applicable planning framework.

If required, verify Non-Agricultural (NA) conversion or the required state permits for such conversion.

Master plans, zoning regulations, a Development Plan, a Land Use Plan, a Plot Plan and building bylaws, such as a Building Code, will also restrict the use of a plot of land.

Some properties may have a clear ownership history but still have restrictions imposed upon their intended use. It is therefore also important to check the land’s permitted use, referred to as the land’s ‘land-use status’, in addition to checking the title.

4. Searching for Litigation and Competing Claims

Title verification involves more than verification of documents provided by the landowner.

This search may involve the legal team examining all relevant court cases and revenue proceedings relating to the property and its previous owners. Proceedings of others may also need to be examined depending on the structure of the ownership of the property.

Public notices are another tool to aid in title verification. A developer may place an advertisement in a newspaper to allow any party to claim or object to a development in relation to a property.

Even where a title appears undisputed, it is better to carry out these checks.

A significant piece of land that has passed through numerous owners or has a particular history can greatly benefit from such a methodology.

5. RERA Adds a Regulatory Layer

Role of the Real Estate (Regulation and Development) Act, 2016 in project-level transparency.

Under Section 4 of the Real Estate (Regulation and Development) Act, 2016, a promoter applying to register a project must provide the prescribed declarations and documents relating to the legal title to the land and any encumbrances, as applicable.

Therefore, RERA registration does not replace title due diligence, but it is part of it, as this information has to be disclosed by the promoter when applying for registration of a project under Section 4 of the Act.

The Transfer of Property Act, 1882 and the Registration Act, 1908 are other key Acts that regulate the transfer of properties and their registration.

RERA registration is one of the documents a buyer should verify. Buyers should also verify title documents, approvals and other relevant project information.

6. Using Digital Land Records

Land records are also increasingly being digitised, so that information can also be used by developers and law firms, etc.

The Digital India Land Records Modernization Programme (DILRMP) aims to bring about change and improve the quality of land records and to make land-related information available to all for transparency and to reduce land disputes. It includes computerisation of Records of Rights, digitisation of cadastral maps and integration of registration and land records.

State-specific portals can also be used to view land information. Bhu-Naksha (Andhra Pradesh), Bhoomi (Karnataka) and Dharani (Telangana) are examples.

The digital records can be compared against the survey details, ownership details and boundaries shown on the maps in other documents.

These online land records can still need to be interpreted and verified with physical documents as well as the corresponding authorities.

7. Independent Lawyers and Lenders Carry Out Their Own Checks

Independent advocates or specialist law firms are frequently appointed by developers to review the title and provide a legal opinion.

Project financing can add another check.

As part of the project financing process, the legal and financial teams of the lender conduct their own due diligence in respect of the title to the property and the security created in respect thereof prior to their approval of the facility to be advanced to the developer.

From the perspective of a developer, title verification from several different angles can occur prior to substantial capital commitment.

8. Contracts and Title Insurance Can Provide Additional Protection

Title verification is not the only way a developer can manage the risk of ownership of a property.

Representations, warranties and indemnities in a development agreement and other contracts can define the responsibilities of the parties in the case of a problem with the title to a property or claims being made against a party in relation to the property.

Title insurance can be another method of managing risk. The scope of coverage provided by a title insurance policy will depend on the project and on the terms and conditions of the policy issued.

It should not be used in place of proper due diligence.

Identify title issues before commencing development, and use contractual or insurance protection as an additional layer where relevant.

9. JDAs and SPVs Need Careful Documentation

A branded developer may not always acquire land in a straightforward transaction.

Some projects are structured through Joint Development Agreements (JDAs) with landowners or through Special Purpose Vehicles (SPVs). The arrangements and responsibilities can vary from project to project.

They may help define the roles of a landowner and a developer; however, they need to be carefully evaluated and negotiated.

Developers would also benefit from agreements that clearly establish who owns the land and who holds what authority to develop said land, and who bears what liabilities. Similarly, scenarios in which a title problem or ownership claim is raised should be outlined in the agreement.

If the promoter is not the landowner, certain disclosure requirements relating to development or joint development arrangements would apply under the applicable RERA rules.

Having a developer-friendly structure does not eliminate title risk. There is still a need to establish the ownership of the land and the legal rights of the developer.

What Should Homebuyers Check?

Buying a home doesn’t mean you have to go through all the steps a large developer goes through internally. Understanding these checks, though, can help you craft better questions for the developer to answer.

Before purchasing a plot, buyers should inspect the following property documents and relevant state records:

• Title and ownership documents
• Previous ownership records
• Encumbrance information
• Relevant revenue records
• Land-use or NA conversion documents
• Approved layout and development permissions
• RERA registration, where applicable
• Disclosed litigation or claims

The process to buy a plot of land should include a check of the title of the land as well as the land records. Furthermore, it is advisable to check the boundaries of the land, the permitted land use, the access to the land, whether any approvals are required and any other encumbrances.

Potential buyers can refer to our detailed legal land purchase in India guide for more information on the process and the checks required before purchase

What specific documents are required can vary from state to state and even project to project. It would be advisable to take an independent legal opinion to verify whether the documents presented by HOABL are sufficient for your consideration.

Conclusion

The security provided by a land title consists of a number of checks rather than one document.

Branded developers can verify ownership history, encumbrances and revenue records, verify land use, search for litigation, disclose required information under RERA, use digital land records and obtain an independent legal opinion. Also, financing institutions and contractual terms can go the extra mile in verifying the title.

A recognised developer’s name may give buyers confidence. However, buyers should understand how the land title has been verified and what documents support that verification.

Find out what documents are available to review in relation to the title, ownership history, land use, approvals, etc.

Answering these questions clearly before you buy will help you understand exactly what you are buying.

FAQs

What is land title security?

Securing the land title means securing ownership of the land in question in a proper and lawful manner and determining whether any undisclosed claims or other encumbrances exist.

How do branded developers verify land ownership?

They will check the chain of title, original transfer documents, revenue extracts, encumbrances, litigation, land-use approvals and any other disclosures required by law, often with independent legal advice.

Does RERA guarantee a clear land title?

No. RERA-registered projects are required to disclose title and encumbrance information, but this information must be verified by the buyer through independent legal due diligence.

Can digital land records replace a title search?

No. Digital land records can help verify certain details, but they do not replace the examination of relevant legal documents.

Why is land-use verification important?

The mere fact of ownership of land does not necessarily entitle the buyer to develop the property for their intended purpose. This would also depend upon the then-current zoning restrictions as well as requirements for conversion and other development permissions.