Property Law Videos - Buying property through General Power of Attorney (GPA)

The main reason as to why purchase of property through general power of attorney is prohibited is because it is often used to avoid payment of capital gains on transfers, to invest unaccounted money otherwise known as black money. In the landmark Supreme Court judgment in the Surya Lamps case, property bought through general power of attorney has been held as invalid by the Supreme Court. Hence, the main purpose which the Supreme Court intends to serve by way of the judgment making property bought through general power of attorney is to lessen the scope of corrupt practices in the real estate industry by as much as possible.   

A power of attorney is primarily used by NRIs (Non-resident Indians) for their property matters in India. For instance, an NRI residing in Canada will, in general, appoint a person as his power of attorney to purchase a property located in Delhi. 

This was, however, the case which was in practice earlier. Purchase of property through a general power of attorney has now, however, been held as being invalid by the Supreme Court. 

Some respite has, all the same, also been provided by the Supreme Court in this regard. This is applicable in the sense that while purchase of property through a general power of attorney has been held as being invalid by the Supreme Court, a general power of attorney can still be appointed to manage any property situated in India.

Property bought through general power of attorney has been held as being invalid since these are used:
to avoid payment of capital gains on transfers 
to invest unaccounted money otherwise known as black money
to avoid payment of stamp duty and registration charges on deeds of conveyance
to avoid prohibitions/conditions regarding certain transfers, as well as
to avoid payment of unearned increases due to development authorities on transfer.

Other than helping to eliminate corrupt practices from the real estate industry, the principle with regard to purchase of property through general power of attorney also indirectly helps the customers of property in the industry. General power of attorney being held as invalid helps in the person purchasing property to be sure about all aspects related to the property. Chances of being defrauded because of the transaction being handled by another person are completely eliminated.