Like many others, you may be keen to invest in property. But perhaps you hesitate to take the first step because homebuying is a tedious and time-consuming process. After all, property purchase involves a lot of house hunting, price negotiations, and paperwork. But things could become simpler if the government’s plan to introduce dematerialisation in immovable property transactions begins to take shape.
Immovable property includes all kinds of real estate. The term could refer to an apartment, a shop, a godown, or a plot of land, along with all structures attached with that property. Suppose dematerialisation is introduced and you do need a demat account to buy or sell property. All transactions would then happen electronically. This could make things easier for the average person, though you would need to figure out how to open demat account ahead of your property transaction.
Demat and immovable property
Not long ago, the shares of public limited companies were traded in physical form. But once dematerialisation was brought in, it eliminated the need for investors to be physically present when buying or selling a share. Even storage of the physical share certificates became simpler because they could be stored in dematerialised (demat) form in a demat account. Today, all share-related transactions take place electronically. Physical share certificates are a thing of the past.
If this is introduced in the real estate sector, property deeds and other paperwork could easily be stored in a demat account. As is the case with other demat holdings, this would limit the chances of damage, loss, theft, or fraud in relation to one’s valuable property documents. Monitoring the documents would also become easier for they would all be stored in a single, easy-to-reach location: your demat account.
Let’s explore this through an example. A person named X has an extensive financial portfolio comprising shares, bonds, debentures, mutual fund units, exchange-traded fund units, and various other financial instruments. His demat account provides a comprehensive view of his portfolio holdings.
X also owns an apartment in Mumbai, a commercial space in Pune, and a warehouse in Satara. Currently, the demat account does not reflect his property ownership. But once real estate transactions become demat, his three immovable properties will also be listed in his demat account.
But what if, say, the commercial space in Pune is not in demat form? X may not be able to sell it until the property is converted to demat form. Selling a non-demat property might be considered illegal.
How to open demat account
The procedure is fairly simple. Approach a depository participant (DP) like Kotak Securities and fill in their account opening form. Submit this, along with identity and address proofs, bank account details, and a photograph. The DP will verify the documents before issuing the new account details.
Summing up
Dematerialisation could ensure greater transparency in property dealings. Buyers could easily check if land titles and ownership is clear. They would also have a better handle on property rates in a given locality. Further, transactions could then happen through the proper banking channels with ease, and the incidence of undeclared payments would decline.
At present, one does not need a demat account to invest in property. But if the demat move is implemented, you will need to get a demat account right away.