Alternatively, they must first construct a house on the plot of land and then apply to DDA to change the tenure of the plot from `leasehold' to `freehold'. DDA will effect this change in land tenure upon receipt of the stipulated conversion charges, which would be approximately a third of the amount payable by the seller on account of unearned increase.

While we have a ready customer for the purchase of the plot, we do not have the requisite resources to build upon the plot of land, a condition necessary for availing of the land tenure conversion facility. We have therefore been wondering whether there is some method by which we can overcome the current impasse without taking undue risks. We believe the cost of conversion of land tenure would be approximately Rs 50 lakh, which the plot purchaser is ready to bear. Kindly detail the step by step procedure that we would have to follow in the event that we decide to seek conversion of land tenure after the purchaser constructs a house on the plot. Please also clarify whether we should apply for the land conversion in our own name or permit the property purchaser to apply for it in his own name at the appropriate time.
Mahesh Guglani, PUNE
I would commend that you follow these steps to sell your property:1. Enter into an Agreement to Sell with the prospective purchaser for the agreed sale consideration and receive the entire sale consideration due to you simultaneous with the execution of this agreement and hand over vacant and unencumbered possession of the plot to him at that time.

2. Enter into a simultaneous builder/ development agreement and permit the purchaser to build a house on the assigned plot after securing all the required approvals on your behalf and in your name within the agreed time-frame at his own cost and expense. You will however agree to provide him any non-monetary assistance such as signing building drawings and applications for securing various statuary approvals, etc., that he may seek from you in writing.

3. Simultaneous with the execution of the agreements 1 and 2 listed above, you should also prepare Form 37(I) in quadruplicate. This forms needs to be signed by both the seller and the purchaser and submitted for clearance to the appropriate authority appointed under Section 269UC of the Income Tax Act.

4. Should the purchaser desire it, you will also give him a General Power of Attorney. This will enable him to apply for and secure, not only approval of building plans from the municipal authorities, but also temporary water and electricity connections and building materials, storage licences, etc., to commence site construction activity in your name and on your behalf, albeit at his own cost and expense.

5. The Power of Attorney will also empower him to apply for and secure the completion and occupation certificates in your name upon completion of the site construction activity. This Power of Attorney will also entitle the purchaser to alienate the property for the purpose of raising loans and renting/leasing the same either as a whole or in parts and to seek conversion of land tenure after receipt of completion and occupation certificates from the concerned authorities.

6. The purchaser will now be free to apply for land tenure conversion either in your name or in his own name as he may deem fit.There is an apparent economy in the payment of land conversion charges by the property owner in his own name to DDA, as he is entitled to avail a rebate of 25 per cent. But I do not recommend this course of action because the land conversion document will come in the owner's name. It would then be necessary for him to re-convey the property to the purchaser by executing a subsequent deed of conveyance. That is after securing a fresh clearance from the appropriate authority constituted under Section 269UC of the Income Tax Act and payment of stamp duties and registration charges twice, which would not be cost-effective.

In the event the purchaser applies for the conversion of land tenure in his own name, he will be issued the `conversion sanad' in his name. This document by practice is registered and constitutes a valid land ownership document under the Transfer of Property Act. The declared value of the document for purposes of stamp duty will be the original premium paid by the owner at the time of execution of the sub-lease in 1971 plus the quantum of conversion charges paid by the purchaser of property post-construction to DDA. However, if you, as the owners, are to convey the property after securing change of land tenure, then the stamp duty and registration charges will be based on the apparent sale consideration recorded in the agreement to sell and Form 37(I).