Property exchange, also called swapping, is a method of transferring ownership of a property. Property Exchange in India is not a new concept. Let’s explain the process. Suppose two owners agree to trade their homes, either permanently or temporarily.
Usually, you can see this method when one wants to move to a new location and must sell the property. Whatever the reason is this method is one of the ways to sell your property and buy a new one without exchange of money.
By eliminating traditional sales and subsequent purchases, let’s explore the rules, regulations, and agreements related to property exchange.
Rules & Regulations
Exchanging properties is not a new concept in India but the legal frameworks link to government laws such as the Transfer of Property Act, 1882 and the Indian Contract Act, 1872.
Here are the Few Rules and Regulations that are :
Lawful Ownership
The properties of both parties must have clear ownership of them if they are exchanging the properties. The properties should be free from legal burdens like mortgages, and unpaid loans.
Stamp Duty & Registrations
The stamp duty varies from state to state and Stamp Duty will be totally based on the value of the property of both parties which is to be exchanged. Both properties must be registered under the Registration Act, 1908.
Income Tax Regulations
Under the Income Tax Act, 1961, exchanging properties may generate capital gains. The difference in property values is considered a capital gain for tax purposes. Consulting a tax advisor is essential in this area due to its complexity.
RERA (Real Estate Regulatory Authority) Adherence
Both properties should comply with RERA, if both properties are under construction or a real estate project to avoid legal issues.
Drafting the Agreement
The exchange properties should be described clearly and in detail. Like Area, Address, and Amenities.
Property valuation must be professionally valued on both the exchanged properties, Which can be like stamp duty or income Tax.
Both the parties must mutually agree to the condition of the property.
If any of the parties fail to meet the terms of the agreement then have to face liabilities.
There should be a clear timeline for the transfer of ownership like possession, registration, and title transfer.
Arbitration and Legal recourse are two dispute resolutions with which we can handle the disputes.
A Few Examples of Property Exchange in India
Pune House Swap (2021)
In 2021, Two families from Bangalore and Pune wanted to exchange their Permanently. They desired to change their lifestyle one wanted to be closer to nature and the other wanted to live a metropolitan lifestyle. So, both these Parties reached a mutual agreement and exchanged the properties with the help of the Real estate Agency.
HYDRA (2023)
In 2023, Hyderabad Charminar to preserve the aesthetic essence of the area HYDRA has collaborated with the local heritage groups to prevent, where heritage homes can be prevented around Charminar without compromising the cultural heritage the property owners can upgrade their homes.
HMDA (2022)
In 2022 HMDA has Facilitated the exchange of properties between house owners and developers in Shahmirpet. Where developers have exchanged their urban plots for new greenfield sites enabling eco-friendly construction.
Conclusion
With this property exchange, there are some advantages like saving time and hassle-free property sales, and also there are a few disadvantages like property value differences, legal complications, and condition of the property.