Dear All,
I have zeroed on a property(resale flat) tagged at 93L.
The owner has purchased it since last 2.3 years. He is getting transfered to Thane and has decided to buy a house there.
Inorder to save on the Capital gain tax which stops after 3 years.. he has given me a proposal as below.

Now I pay him ~20L full cheque.... and we sign an MOU Stating the deal at this price and the possesion/registartion happens after i payhim rest of the amount after 8 months.. when he is out of the Capital gain tax period.

also I start staying immediately ... doing a 8 months leave and licence agreement with him.

what I need to know from you dear firends is

1.what are the negatives of this deal?
2.what should be clearly mentioned in the MOU?
3.How and when should I approach for the loan?
4.What should my strategy of savings etc during these 8 months.
5.When should I pay the broker?

tHANKS
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  • Doesnt seem right to me to pay 20 Lakhs upfront and get only a MoU in return. I dont think MoU has much legal value. Its just something signed in initial stage as Letter of Intent, not really enforceable in court of law.
    Capital Gains tax - If you sell a property and gain from it, you need to buy another property within 3 years with that gain else you pay Capital gains tax on that. So not understanding how your seller is saving on Capital Gains tax by selling it after 8 months (and taking only 20% price now).
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  • Boss you are investing 93L which is a huge sum of money. Never trust them and err on the side of caution. As saxena mentioned cap gains will not accrue if he buys a property within three years so if he is so keen on saving the tax he shd buy a flat in thane and not expect u to bend backwards. Take legal opinion because i am sure he is giving some carrot to you for even considering an option as preposterous as this one!
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  • I got curious about this thing and googled it and found that some lawyers have answered similar questions. Understood now that your seller is trying to avoid short-term capital gains.

    See below link where some lawyers are advising not to enter such MoUs, and go for a sale agreement only (unless you know the seller and trust him).

    Registration of MOU - Forum - Law, Lawyers, Advocates, Law Firms,Legal Help, Legal Experts,Judgements,Law Help, Indian Lawyers
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  • Originally Posted by sh-saxena
    Doesnt seem right to me to pay 20 Lakhs upfront and get only a MoU in return. I dont think MoU has much legal value. Its just something signed in initial stage as Letter of Intent, not really enforceable in court of law.
    Capital Gains tax - If you sell a property and gain from it, you need to buy another property within 3 years with that gain else you pay Capital gains tax on that. So not understanding how your seller is saving on Capital Gains tax by selling it after 8 months (and taking only 20% price now).



    Doesnt sound right. If you sell you property within 3 years of your purchase date then you need to pay capital gain on the gains. SO the seller is trying to avoid that by waiting for another 8 month which means he has waited for 3 years and hence no capital gain.
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  • It doesn't seem right. Mou may not stand in court if there is a dispute. If, he is so interested in selling after 8 months...then he shud let u live there for 8 months on rent..and then sell it completely.

    You have not mentioned..what kind of a deal is 93 lakhs...is property worth 1.1 crore...and he is giving u this deal?
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