Property exchange is also called swapping it is a method where one can transfer ownership to the property. Property Exchange in India is not a new concept. Let us explain what the process is. Suppose the 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.
With traditional sales and subsequent purchases eliminated, let’s explore the rules, regulations, and agreements related to the exchange of property.
Rules & Regulations
Exchanging properties is not a new concept in India but the legal frameworks are linked 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
Capital gains can be generated by the exchange of properties under the Income Tax Act, 1961. The difference between the value of the properties can be considered a capital gain for tax purposes when they are exchanged. Tax advisors should be consulted in this area since it is complicated.
RERA (Real Estate Regulatory Authority) Adherence
Both properties should be registered under 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
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
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
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.
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.
While property exchange is a unique niche concept in India, this method involves private parties negotiating and transferring the ownership of the real estate assets, however, the government instances play a vital role in facilitating and regulating or initiating property exchange with proper planning and legal advice. Property exchanges can provide hassle-free exchanges of property, whether they are temporary or permanent.