Can You Buy a Property in a Minor’s Name? Know Laws and Facts

Real estate has been one of the most popular sectors for investments in India. Investing in property is even popular when parents want to ensure a secure future for their children. However, the laws for purchasing a property in a minor’s name are slightly different from the usual ones. 

Laws Related to Property Purchase in a Minor’s Name in India

There are several Acts related to the purchase of a property in a minor’s name in India. These include:

Indian Contract Act, 1872

This Act states that you can purchase a property in the name of a minor only if you pose as their immediate guardian and become the signatory authority on their behalf. Under Section 11 of this Act, there are guidelines that  one is eligible to purchase a  property in their name only after attaining 18 years of age.

Registration Act, 1908

It prohibits minors from signing property registration papers or any other legal document before they turn  18. 

Transfer of Property Act, 1882

This Act states that a minor can only become an owner of the property when anyone gifts them  a piece of property. In such cases, the parents cannot intervene in dealing with that property. As the agreement for the transfer of any immovable property needs to be registered, as per the provisions of the Registration Act, and since any gift has to be accepted by the minor to make it effective, it is advisable that the gift is accepted by the natural guardian of the minor on behalf of the minor, to avoid any hassle. 

Steps to Register a Property in the Name of the Minor

You must follow the steps below to register a property in a minor’s name:

Step 1: Arrange all the essential documents, such as survey documents, payment documents, eligibility proof documents and other relevant papers.

Step 2: Verify clearance of all the pending dues of a property. e.g electricity bills, water bills etc. 

Step 3:  Prepare the property papers with the minor’s name as the owner and your name as the guardian. . However, you will be the signatory authority during the registration.

Step 4: Pay the stamp duty as per the charges levied in your state. Once you pay this money, you will receive the relevant stamp papers online or at the local office.

Step 5: To complete the registration process, go to the registrar’s office along with the essential papers and two witnesses. Photo ID and passport-size photo of both witness is also required to be submitted. 

As soon as you complete this process, you will receive a receipt for it. However, you must  be eligible to own land in India. 

Additionally, you must also be aware of the taxes associated with the purchase of a property in the minor’s name, to estimate the correct costs. 

Tax on Property Owned by a Minor

If a minor receives a property as a gift or purchases one in their  name, it is not taxable. Nonetheless, they can only own up to two houses in their name. 

However, if you rent out the same for an additional source of income, you will have to pay a tax on the same. This tax accounts for about a 30% deduction of the income from the rent of that property. 

There are some regulations to abide by if you plan to sell a property owned by a minor.

Sale of Property Owned by a Minor

According to the Hindu Minority and Guardianship Act of 1956, even if you are  in the property deed as the guardian, you cannot sell that property. So, if you want to sell it for an urgent requirement of funds, you will have to make an application to the court. However, if the minor objects  to the sale,  the court will hold the transaction void, no matter how profitable the deal is. 

There are certain advantages of purchasing a property in a minor’s name that you can enjoy. 

Advantages of Purchasing Property in a Minor’s Name

Below are certain benefits you can reap when you purchase a property in the name of a minor:

• You can ensure financial security for your children. Since the property value keeps increasing, it can give you substantial returns. In addition, they can use the money to cover study-related expenses or any future expenses
• Your children can put the property on rent. It  would ensure a regular flow of funds every month and, hence it is a stable source of income
• Your child may need funds for their future endeavours such as starting a business or pursuing an educational qualification which requires a relatively large corpus. One easy and accessible way to secure funds is availing a loan against property.  

Disadvantages of Purchasing a property in the name  of a minor

Below are some disadvantages of purchasing a property in the name of a minor:

• You cannot mortgage the property to opt for a loan against it during the financial crisis.
• You cannot sell a property in a minor’s name without taking prior permission from the court. 
• You will have to pay a tax if you are planning to put the property on rent to raise funds against it. 

Final Thoughts 

There are several advantages and disadvantages, too, associated with purchasing a property in a  minor’s name. For example, in case of the parent’s accidental death without a written Will, the guardianship of the minor’s property is shifted to a close relative. However, there is a  high chance that they might misuse their rights. 

So it is crucial  to ensure the transfer of authority to a trustworthy person. Once you are aware of the laws and facts, you can maximise your profit from purchasing the property in a minor’s name.

Frequently Asked Questions (FAQs)