Decoding the Property Transfer Act in Pakistan

Do you know that the property transfer process in Pakistan is more than just a piece of paper with transactions? 

It’s about navigating the intricacies and having knowledge about the laws and bylaws that govern the procedures. These laws might seem difficult, but they are designed to ensure a smooth and seamless transition of ownership. Whether you are thinking about buying a property, getting it inherited, or even gifting it to someone, understanding the process is crucial. Thinking that you do not have anything to do with property matters is all about mindset. After all, transferring property is not just a transaction; it's about preserving a legacy and heritage.

As soon as you hear anything related to property in Pakistan, you might wonder: What does a transfer of property mean?

In Pakistan, transfer of property refers to the entitlement or ownership of property from one person to another. This process is not only limited to the implication of sale or purchase but also gift, mortgage, or exchange.

There are usually three types of property transfers in Pakistan:

Types of Property Transfer

• Transfer by Sale or Exchange

The transfer of immovable property (house, plot, or building structures) occurs when the owner wants to sell it. In other terms, this is known as the home-buying process, which starts with the mutual decision of the buyer and the seller. According to the Property Transfer Act of 1882, the sale of property is not completed unless the promised amount has been paid. After the negotiation, the first step is to pay a token amount of 50,000 PKR. This means that the buyer is interested in the property and will now pay off Bayana.

Documents Required

One of the most crucial documents for property transfer by sale that serves as the binding agreement between buyer and seller is the Sales Deed. A sales deed assures the completion of the transfer, which is followed by:

• CNIC copies of both parties 
• The original attorney of the property
• Ownership Deed or Fard-e-Malkiyat
• NDC (No Demand Certificate), which shows that the buyer does not have to pay any further taxes or dues.
• NOC (No Objection Certificate) from the respective authorities, in case the property is under the jurisdiction of a housing society.

Once the documents and other legalities are approved by the registrar, you will be legally the owner of the property.

• Transfer by Inheritance

Cleared by the term “inheritance”, this transfer is devolved among the legal heirs of the property. As mentioned in Pakistan’s inheritance law, the property will be passed on to the blood heirs according to the will of the owner after his death.

Pakistan is a country with so many different cultures and sects, and every community enjoys their inheritance rights. The Property Transfer Act, of 1882, clearly states that different laws for Muslims are followed by Islamic Shariah.

According to it, the property will be passed on to the legal heirs of the deceased, and if not, then the rest of the distant relatives are considerable. Likewise, Hindu and Christian laws of inheritance are governed by the Hindu and Christian Act of Succession in 1925.

Documents Required

Here, the most crucial document is considered to be the inheritance certificate, or “wirasatnama”, which is issued by the country’s civil court. This inheritance certificate provides legal recognition to the legitimate heirs of the deceased, confirming their right to inherit the asset. To claim this certificate, an application would be submitted that would cover every detail regarding heirs and the property. After the court hearing sessions, the issuance of the certificate will be done. The application is followed by:

• The property owner’s death certificate
• CNIC copies of the legal heirs and the departed one
• Affidavit to confirm the relationship in statement form
• Mutation or registry of the property
• NOC is obtained from other legal heirs who are not applying for the inheritance certificate or simply disown their rights.

Most people get confused regarding how to transfer property from father to son in Pakistan. In most cases, the son gets a larger share of the asset as compared to his sisters. To ensure a smooth process under Islamic Shariah, a person should consult a legal advisor or lawyer.

• Transfer by Gift

When it comes to gifting an immovable asset to someone, there are some misconceptions about how to register it and what the legal procedures will be. However, it is perfectly legal to transfer property as a gift to someone who is also known as “Hiba” under Islamic law.

According to the Property Transfer Act in Pakistan, the transfer before the death of the owner undergoes different steps, and a major consideration here is to accept the gift before the death of the owner; otherwise, it will be an unnecessary void.

Furthermore, if the property is transferred forcefully or under fraud or deceit, then it would be considered invalid. In Pakistan, the trend of donating one's property to either a welfare organization or a charity without expecting anything in exchange or compensation is common.

In this case, the value of the property is not the focus, but its market price would be given priority.

Documents Required

Like other modes of transfer, this also requires a Gift deed, which ensures that the procedure is voluntary and does not involve any monetary transaction. A gift deed is a binding agreement that covers all the details about the donor and the donee.

Additionally, it is not limited to immovable property but also contains the authority to transfer tangible assets like vehicles and jewelry.  

To acquire a gift deed, a person should have the following documents:

• CNIC copies of both parties
• Property tax clearance certificate to ensure that the property is not disputed
• NOC for property transfer 
• Allotment paper
• Official seal of the deputy director
• Stamp paper
• Affidavits (if required)
• Death certificate (if the owner is deceased)
• Witnesses information
• Proof of acceptance

Considerations and Restrictions for Property Transfer

• If someone has a chance of inheriting property, like being next in line to get it, they can't give that chance to someone else.
• If someone has a right to use something because they're the owner, they can't give that right away to someone else.
• If someone is supposed to get support or money for their upkeep in the future, like after a family member's death, they can't give that right to someone else.
• If someone only has the right to take someone to court (sue them) but doesn't have anything else, they can't give that right to someone else.
• Government jobs can't be given to others, and the money paid to government employees can't be given away before or after they get it.
• Stipends given to retired military, naval, and air force personnel, as well as certain government pensions, can't be given to others.
• No transfer is allowed if it goes against the nature of the thing being transferred, if it's for an illegal purpose, or if the person receiving it is not legally allowed to get it.
• If you're a tenant with a right to live in a place but can't sell it to someone else, however, there are certain rules and rental agreements in Pakistan to follow.

Laws that Govern the Transfer Property in Pakistan

In Pakistan, the laws for property transfer are well-defined and outline the legal requirements and conditions for the transfer of property. Here are some of the main laws and regulations that are necessary to know when dealing with any property-related matter:

• Transfer Property Act, 1882

This act covers all the relevant modes of transferring property. From the rights and liabilities of the parties involved to the legal requirements and property transactions, everything will be mentioned here.

• Stamp Act, 1899

This act mentions the rates of stamp duty based on the value of property and various legal documents.

• Registration Act, 1908

This act deals with property registration and includes all the information about sales deeds, leases, and mortgages. The documents required for the registration of property under the terms and Pakistani regulations.

• Tax Laws

Taxation laws may apply to property transfers in Pakistan. These taxes are broken down below:

1. Stamp Duty is 3%
2. Capital Value is 2%
3. The district council fee is 1%
4. Registration is usually 500 PKR but it can differ

• Local Laws and Authorities

Different provinces in Pakistan have contrasting laws and regulations. They vary according to Islamic principles and other communities' cultures. Sometimes these laws are amended by the municipal and local governments. 

• Property Transfer Procedures

When we talk about property transfer procedures in Pakistan, they are not just different from city to city but also from urban to rural areas. The main reason for this is that the property market in Pakistan is a vast market that has its own set of rules and regulations that are not similar to each other.

Property Transfer Procedure in Rural Areas

The complexity of laws and regulations may also differ in rural areas in terms of the Land Revenue Act of 1967, which classifies the transfer of immovable property mostly in agricultural areas. Let’s discuss each step in detail under the laws and regulations that apply to property transfer procedures in rural areas.

• Land Revenue Act 1967

The only law that governs the transfer of immovable property is the Land Revenue Act. It collectively covers all the legalities and steps that are included in the process.

• Collaboration of Authorities

When transferring property in rural areas, there are two main figures involved in the whole process.

1. Patwari is responsible for managing village accounts, maintaining land records, and verifying property ownership.
2. Tehsildar is responsible for verifying the transfer, and examining whether the property transfer procedure is aligned with legal requirements. The revenue officer at tehsildar office also has the authority to reject the transfer if any irregularity is found. However, they can’t interfere in a transfer that is related to inheritance, registry of deeds, or court decisions.

• Reporting the Intention of Transfer

The process starts when the party wishing to transfer property, formally reports their intentions to the respective authorities. This initiative also alerts other influential people who might get involved for further processing.

• Identification of the Documents

Once the process has been started, Patwar and Tehsildar begin to verify the documents. Examining the land records, and ownership details from both sides to make sure the parties legitimated the intention to transfer.

• Involvement of other Authorities

In rural areas, there is an open assembly of influential landlords from a particular area, usually known as Jirga that helps in concluding the transfer of property. This group of people ensures the fairness and transparency of the process, by involving other local representatives and community members. They also aim to prevent fraudulent or forced transfers.

Property Transfer Procedure in Urban Areas

Property transfer procedures in urban areas of Pakistan are different from those in rural ones in obvious ways. These cities showcase prominent challenges that make meticulous documentation necessary.

For instance, the property transfer procedure in Lahore is under the governance of the Lahore Development Authority (LDA). The process involves considerations such as sales deeds, NDCs, NOCs, site plans, affidavits, and transfer letters that will be issued from specifically tailored authorities after you have submitted the required documents.

Similarly, the property transfer procedure in Karachi is influenced by its local authorities, like the Clifton Cantonment Board, the Defence Housing Authority (DHA), or the KDA. The process is somehow similar to that of other metropolitan cities. 

Additionally, the process also covers issues like land grabs (which are popular in Karachi), mortgages, and matters related to the power of attorney regulations. Here, the procedure might get seamless if you involve a real estate agent who knows every step that is involved in the property transfer.

Conclusion

After all the legalities are done, make sure you are aware of the property tax and zakat that is calculated against your property. This will help you keep track of your property and plan your future investments accordingly.

The Property Transfer Act in Pakistan stands as evidence of the nation’s commitment to encourage a real estate sector characterized by transparency, legality, and security. Its provisions provide a legal framework that guides and regulates property transactions, enabling parties to engage with clarity and confidence.

As Pakistan continues its journey of development and transformation, the act may undergo further refinements to accommodate emerging technological trends and societal changes. This ongoing evolution ensures that property transactions remain steadfastly trustworthy, transparent, and efficient.