Transfer of rights in joint property

Saurabh Nene (Querist) 13 June 2020 This query is : Resolved
I hold a joint property with my Brother in Pune, Maharashtra. This is a self acquired property. We both had contributed some amount, out of our own sources and also borrowed housing loan. We are contributing 50% each for housing loan EMIs.
Now, I want to transfer my rights in the said property in favour of my brother. He will pay me, the amount contributed by me initially and he will also take over the balance amount of housing loan i.e. (he will alone pay the EMIs henceforth). My Queries:
1. Which document shall I execute for transfer of rights, Gift Deed or Release Deed? Which option will save Stamp Duty?
2. While determining the 'Market Value' of the Property for Stamp Duty purpose, whether the balance amount of Loan will be deducted from the actual property value? Can it be treated as 'encumbrance'? Will it help in saving stamp duty? If not is there any other way out?
Please advice me on above. Thank you all experts in advance

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Quick Summary

This discussion concerns transferring rights in a jointly owned self-acquired property in Pune between brothers. The primary questions revolve around the correct legal document to use – a Gift Deed or a Release Deed – and how to minimise stamp duty. It's clarified that a Gift Deed is unsuitable as there's consideration involved (initial contribution repayment and loan takeover). A Release Deed or Sale Deed are more appropriate. The balance housing loan amount is generally not deducted when calculating market value for stamp duty purposes. Transferring the loan liability also requires bank consent, with options like a new loan to clear the old one being suggested.

SHIRISH PAWAR, 7738990900 (Expert) 13 June 2020
Hello,

To transfer your share in the property you can execute gift deed. You will be liable to pay the stamp duty according to the market value of your share in the property and registration charges as per procedure. Loan amount will not be considered while calculating the stamp duty of your share in the property.

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Raj Kumar Makkad (Expert) 13 June 2020
Registered Release/Relinquishment-Deed shall save the stamp duty. Though Stamp duty is applicable as per State Act but almost it is nominal in all States. In Haryana, stamp duty for Release-deed is only Rs. 500/-.

There is no no sense of your second query in view of above-mentioned reply of your query no. 1.

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Saurabh Nene (Querist) 13 June 2020
Thank you both of you. I think in Maharashtra stamp duty on Release deed of property, is equal to that of a Sale Deed, except in case of release of ancestral property I am right Shirish? .

Raj Kumar Makkad (Expert) 13 June 2020
It shall be better to enquire locally.

Rajendra K Goyal (Expert) 13 June 2020
You said:
Now, I want to transfer my rights in the said property in favour of my brother. He will pay me, the amount contributed by me initially and he will also take over the balance amount of housing loan i.e. (he will alone pay the EMIs henceforth).
Reply:
Bank may not agree to release you from liability of Housing loan till it is fully paid. Bank would not give consent / permission for Gift / release deed till its loan is paid.
You can suggest your brother to take housing loan by mortgaging full property after transfer in his name from same / other Bank and close the present loan. Only some service charges / processing fee has to be paid again.

Rajendra K Goyal (Expert) 13 June 2020
1. Which document shall I execute for transfer of rights, Gift Deed or Release Deed? Which option will save Stamp Duty?

Reply:

Find out the applicable stamp fee in each case. Gift is not associated with consideration, better move for release / sale deed. Applicable stamp duty can be asked from Registrar office / local lawyer.

You said:
2. While determining the 'Market Value' of the Property for Stamp Duty purpose, whether the balance amount of Loan will be deducted from the actual property value?

Reply:

Stamp fee can be calculated on the basis of circle rate applicable. Loan amount would not be deducted from circle rate.

Rajendra K Goyal (Expert) 13 June 2020
You said:
Can it be treated as 'encumbrance'? Will it help in saving stamp duty? If not is there any other way out?

Reply:

It is doubtful, loan amount would be saving any stamp fee.

kavksatyanarayana (Expert) 13 June 2020
As you both brothers have equal rights over the property, so you can relinquish your rights to your brother. To my knowledge, the stamp duty in Maharashtra is Rs.200/- in favor of family members (brothers/sisters). You can add a sentence in the deed of release/relinquishment, regarding the loan amount to be cleared by your brother. It will not attract stamp duty.

Raj Kumar Makkad (Expert) 13 June 2020
Bank shall have no objection if the mortgaged property is not changed, however, it shall be better to have a no objection certificate from the banker before the registration of the release-deed

Dr J C Vashista (Expert) 14 June 2020
The property can not be transferred by executing a "gift deed" since no consideration can be there in a gift. The property has encumbrance of bank loan, which has to be transferred in the name of your brother. Moreover, Gift deed attracts same stamp duty as of Conveyance deed.

Relinquishment deed can not be registered as release of a right or a claim can only be in favour of a person, or a claim can only be in favour of a person who had that pre-existing right or a claim, whereas the property is self-acquired by both of you,
Beisdes this release deed shall attract stamp duty in terms of article 55 of Indina Stamp Act, 1899 being co-owner of property.

You have the only option to execute "Sale Deed" after obtaining NOC from financier on transferring outstanding loan in favour of your brother (Vendee).

Stamp duty being a State subject, consult local lawyer/ Sub-Registrar for proper advise.

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P. Venu (Expert) 14 June 2020
Yes, the transaction cannot through a gift deed since, admittedly, it is not free of consideration.

Moreover, there is no scope of relinquishment as the property has not devolved through common inheritance.

The issue is complex in view of various aspects inherent. The obvious procedure is the one suggested by Mr. Vashista. The stamp duty applicable would be in terms of Maharashtra Stamp Act, not Indian Stamp Act.

Rajendra K Goyal (Expert) 14 June 2020
As the property is mortgaged with the Bank, it is encumbered.
Execute agreement to sell your portion to your brother.
Purchasing Brother would approach Bank for loan.
Proceeds of new loan would be used to close old loan.
Title deeds would be deposited with the Bank, after registration of your share in the property.

If the income / salary of your brother is not enough to be viable as per requirement of loan, Bank may refuse to proceed.

Raj Kumar Makkad (Expert) 14 June 2020
I slightly differ with the opinion of some of the epxerts that the relinquishment-deed can be got registered only in case of the ancestral property and not in case of the purchased property by the parties to the deed.

There is no such law which may restrict a person to relinquish his right in favour of his blood relative such as in the given facts. The banker is not loser as the property already stands mortgaged with it. It may maximum ensure the repayment of the loan amount and may even ask for additional mortgage.

Raj Kumar Makkad (Expert) 14 June 2020
It shall be better for the author to approach his banker first before proceeding ahead.

Rajendra K Goyal (Expert) 15 June 2020
Respectfully differ with the expert, Author need not to approach the Banker.
It is his Brother who need to approach Banker with the proposal.
Either present or any other Banker would be ready to give a fresh loan / switching of the loan. Bank would remit proceeds of fresh loan for liquidating present loan. Bank accepts agreement to sell by joint owner while releasing loan subject to undertaking on prescribed format by seller.
Title deed with fresh sale / gift deed from author would be deposited with the Bank.

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