Risks of Buying Inherited Property in India as an NRI

For some Non-Resident Indians (NRIs), buying inherited property in India may feel like buying a secure and emotional investment. Such properties are usually family-owned and believed to be legally safe. However, there are potential legal problems with inherited property that are quite different from buying property from a builder or individual seller. An Indian lawyer dealing with property disputes will often say that the majority of such litigation stems from disputes over unclear rights to inheritance and defective title. It is important to be aware of legal problems that may arise before a transaction is made on the property.

 

What Is Inherited Property Under Indian Law?

 

Inherited property is the property received through succession by either of the following:

 

●       By testamentary succession (through a valid Will), or

●       By intestate succession (without a Will, as governed by personal laws, like the Hindu Succession Act of 1956, or the Indian Succession Act of 1925)

 

This property can either be:

●       Self-acquired property of the deceased, or

●       Ancestral property, where multiple legal heirs are entitled to the property by virtue of their birth.

 

This difference is crucial to the extent of ownership and the right to sell the property.

 

Risk 1: Title Is Unclear Because There Are Multiple Legal Heirs

 

Having more than one legal heir is the most common risk in dealing with inherited property. If one heir decides to sell the property without the consent of the other heirs, the transaction is liable to be contested. Courts have consistently held that:

●       Every legal heir has a divisible interest in an inherited property.

●       A co-owner of a property cannot sell the entire property without the concurrence of the other co-owners.

 

A famous Indian lawyer once remarked that not having the consent of the other heirs may render the transaction voidable.

 

Risk 2: The Will Is Disputed or Is Invalid

If inheritance is based on a Will, risks include:

●       Wills that are forged or fabricated,

●       Wills made without the legal capacity to do so

●       Wills not properly attested under the Indian Succession Act, Section 63

 

A Will not backed by a Probate (in some jurisdictions) or a Mutation, and an heir's legal survey does not automatically vest ownership. The dispute over the Will can frustrate or divest ownership.

 

Risk 3: Pending Partition or Succession Disputes

Many inherited properties are subject to:

●       Court cases for Partition suits

●       Court proceedings for Succession certificates

●       Court orders for Injunctions

 

Even if possession is granted, courts later end up restraining the sale or declaring rights to other heirs. Lawyer firms in India say that this is especially the case for NRIs. They rely on the family to give them information instead of getting the information through the courts.

 

Risk 4: Defective Mutation and Revenue Records

 

Mutation entries indicate possession, not ownership, in revenue records. This is risky when

 

●       A property is mutated in one heir’s name without legal grounds.

●       Records improperly reflect the succession

●       There’s a discrepancy between the municipal or land records and the title documents.

 

Courts have reiterated that ownership through succession disputes is not established through mutation alone.

 

Risk 5: Encumbrances and Liabilities of the Deceased Owner

Inherited property may be burdened with:

●       Outstanding loans

●       Tax Arrears

●       Mortgages or charges under Section 100 of the Transfer of Property Act

Indian law states that a legal heir takes on the assets and the corresponding liabilities of the property inherited. So if the encumbrances on the property are not verified, the buyer may face legal recovery actions.

 

Risk 6: Restrictions on Ancestral Property

 

If the property is considered ancestral:

●       Every coparcener has a right by birth

●       Every coparcener’s consent is required

●       Sales can be contested even if there is no need (for a sale)

 

Sales of ancestral property without a legal necessity and without a family settlement are one of the most contentiously litigated issues.

 

Judicial Opinions on the Sale of Inherited Property

 

The Indian judiciary has laid down the following principles:

●       A complete and transparent title

●       There must be proof of the succession

●       Consent of all the parties involved

 

The cases presented and analysed by numerous lawyer firms in India indicate that, in the case of purchases that involve the potential of inheritance, buyers must exercise greater care than in a standard purchase.

 

Conclusion

 

There are substantial legal risks involved in the purchase of ancestral property in India by an NRI if the various ownership stakes are not clearly defined. Problems concerning numerous heirs, ambiguous wills, ongoing lawsuits, and issues of ancestral claims can, even long after a transaction has been completed, annul that transaction. The burden of proof is on the buyers to have done their due diligence concerning the succession, title, and encumbrances before completing the purchase. Lawyer firms in India have pointed out that, in transactions that are connected to inheritance, the transactions have to be more carefully assessed than in standard transactions. The only way to assuage long-term risks is by possessing a legally verified ownership history.