Due diligence is a term implies the reasonable verifications, investigation for seeking information and precautions taken to avoid or identify foreseeable risks. It is the process to understand an action of particular circumstance prior to consummating it. Due diligence is obtaining sufficient and reliable information about the subject/property to help to uncover any fact or circumstances that would have a reasonable probability of influencing a property decision or making of an valuable offer for a consideration . On other hand due diligence is to determine the value of the subject/property which means you must get what you are paying for. And make sure that the all the necessary information must obtain within the predetermine time.

In India there is no law on due diligence. Legal Due Diligence in a real estate transaction is an investigation or verification of real estate property records and anything else that deemed to be relevant to the purchase, sale, purchase, mortgage or lease of the property. It refers to the process which every individual shall adapt before executing an agreement in relation to the immoveable property /real estate. This is for the purpose of making the person aware of the risks involved in the transaction and minimizing them in consonance with the parties’ requirements. There are many processes involved in the due diligence including the special due diligence, business due diligence, accounting due diligence and the legal due diligence. By conducting due-diligence, the person able to assess the risks associated with the property which he is planning to purchase or sale. It is basically like you must do your homework before making the purchase.When an NRI think about to investing in a property, the first thing they should do is check whether the property is free of any legal disputes. One thing that can create a legal problem is not having a clear title of the property. In general, the title means that the owner has the full legal right to the property. The title must be free of all kinds of liabilities so that it the transfer can be done without any difficulties.

Requirement of Legal due diligence

While buying any kind of property in India, it is important to conduct due diligence to verify the titles of the property and also check whether the property must free from any legal hassle. Such kind of liabilities could either affect the right of the owner to transfer the property ownership even after transfer and it will affect the buyer at a later stage. Hence it can be said that the due diligence is important to gather complete and reliable information of the property so as to make a clear investment without any risk.

How long does a due diligence take?

The time line for carrying out a due diligence report completely based on the information given by the client for undertaking the due diligence report. A report varies from 30 days to 90 days or may be more. But all this is subject to the information given the area where the property situated.

  1. Title review: Always get a preliminary title report on property in which you’re interested to buying. Also make sure that there must not be any hidden liens on the property that will occur into unpleasant surprises later.
  2. Inspect the property thoroughly.
  3. If the property has been purchased all documentation with the seller for the property must be taken.
  4. Review the price trends: It is important that information provided, should give you an idea of whether property values are going low or high.
  5. Land records and mutation entries: These are the record of tenancy, rights and cultivation, issued by the registrar. These records could be obtained from the Tehsildar’s office.
  6. Certificate of completion – In due diligence there should be obtain a certificate or declaration confirming the completeness of the disclosed information and documents, and that no material data has been pending.

Conclusion

Legal due diligence, although a very complicated process but once the buyer undertakes it and get the results, he can be sure whether his investment would be a good decision or not. It is of most important in property investments to do a thorough investigation of the property titles. A person can make a profitable investment only if he carefully examines the various legal issues involved in the transactions and, if necessary, should take the advice of a qualified property lawyer for carrying out due diligence.