by Project Sales 
A Power of Attorney (POA) is a useful instrument for Non-Resident Indians (NRIs) who own a property in India. Since the NRIs cannot be physically present to handle the financial and legal transactions, they need someone to act on their behalf and complete the formalities. A POA helps the NRIs in achieving this objective.
A Power of Attorney (POA) is an authorization given by a person in writing to another person to carry out deeds on his behalf. The person who writes the deed is referred to as the grantor, donor or principal, and the person who acts on another’s behalf is termed as the attorney or the agent.
A Power of Attorney (POA) plays a significant role in the real estate dealings of the Non-Resident Indians (NRIs). As per the Registration Act, 1908, whenever an NRI sells or purchases a house property, both parties must be present physically while registering the transaction. If the buyer or seller is not present to sign the documents, a trusted person can be appointed as the Power of Attorney. A POA assigned to facilitate property transactions should be registered with the respective sub-registrar. In case the buyer is an NRI, the POA needs to be certified by the Indian Consulate/Embassy of the country in which he/she resides.
In the case of real estate, a POA can be used for the following purposes:
- Mortgage, sell, lease, exchange, grant, borrow, or collect rent from a property
- Manage and settle disputes
- Perform requisite acts as required by banks, insurance companies, or financial institutions to enter into contracts or deal with bonds.
- Payment of taxes
- Taking a home loan or a home improvement loan
- Insuring the property
Types of POAs:
There are, in general, three types of POAs that the NRIs can use for their benefit.
Special POA: In such type of POA, a power of the attorney is restricted and confined to a specific purpose. A special POA can also be transaction-specific and may cease to exist after the completion of the deal.
General POA: As compared to a special POA, a general power of attorney confers broader powers to the attorney, especially with regards to making decisions on behalf of the principal. Additionally, the agent can carry several activities sans any limitation on the transactions.
Durable POA: As the name suggests, a durable POA lasts for an entire lifetime unless explicitly cancelled by the grantor. Also, the agent can take over all the operations of the grantor’s property in case the latter becomes mentally incapacitated.
An important point to note here is that the NRIs can use a specific POA if they want to authorise a person to buy or sell a property on their behalf. However, the POA must necessarily be registered in India after the payment of stamp duty. In case a person purchases a property through GPA, he should have the possession of the property along with a registered sale deed.
A word of caution:
The buyer should be extremely cautious while buying a property through POA, which is executed by an NRI. A sale deed can be declared null and void because of a small error in the POA execution. There have been several incidences where the lawyer of NRI had concealed his status to avoid Tax Deducted at Source (TDS). However, this practice should be avoided. To apprise, an NRI is liable to pay TDS at 20-30 percent while selling a property in India.
Also, it is a misconception that payment towards property transaction should be transferred to the POA holder. As a practice, the resident Indian buyer should make the payment only to the NRI seller in his NRO/NRE account. While an NRI can authorise the POA holder to collect payment on his behalf, he cannot authorise payment to the POA holder. In case there are multiple NRI sellers, payment should be transferred in the proportion of their stake in the property.
How can POA be executed in India?
In case the NRI is present in India, he may execute the POA here itself. Here are the steps to do so.
- Get the desired matter of the POA drafted and typed on a non-judicial stamp paper of value Rs 100.
- Visit the office of the sub-registrar along with two representatives and witnesses. Remember to carry the ID Proof of the witnesses, a photocopy of the POA, and the original copy.
- Both grantor and attorney must sign the required POAin front of the sub-registrar and in the presence of the witnesses.
- Collect the registered copy of the POA on the due date, which might take 3-5 days.
How to execute the POA in case the NRI is settled abroad?
Under such circumstances, there are two ways to execute a POA.
Legalisation: In this case, the signatures of the notary are authenticated by the representative of the Indian Embassy. While it is not necessary to get the POA at the time of execution, the grantor must get it stamped within three months from the date of receipt of the POA in India. The stamp duty is payable as per Section 2 (17) of the Indian Stamp Act, 1899.
Apostallisation: Any deed, including POA, which is executed outside India is proven through the process of Apostallisation. To apprise, apostille is a certificate that confirms and verifies the signature of the authenticating person. The process is governed by the Hague Convention, 1961. However, it needs to comply with Indian laws as well, including the Indian Registration Act, 1908 and the Power of Attorney Act, 1882. Therefore, if executed abroad, the POA holder must also get the POA registered in India.
The NRI’s can appoint multiple power of attorneys to handle different financial transactions in India. However, it is advisable to appoint a single power of attorney for a single transaction so that there is no conflict of interest between different power of attorneys for the same transaction. Moreover, the grantor can revoke the POA anytime in case of any misdeed on the part of the agent. It can also be revoked if NRI dies or becomes insane or is declared insolvent.
Although POA is a legal way of authorizing someone to manage properties on the owner’s behalf, there are numerous cases where misuse of POA has invoked civil and criminal liabilities. Therefore, one should always consult a lawyer to draft and process the POA, especially regarding real estate and other transactions involving hefty finances.
