General vs. Special Power of Attorney in a Home Loan – What You Need to Know

There may be instances when you are unable to meet lenders in person, sign paperwork, or complete other requirements when buying or financing your ideal home. In these cases, a Power of Attorney (PoA) for a Home Loan might be useful.  

However, the question now is: is it better to choose a Special Power of Attorney (SPA) or a General Power of Attorney (GPA)? The decision is important, particularly when applying for a Home Loan and buying real estate. We will describe the POA requirements for a Home Loan application, understand their applications in real estate, and break down the differences in this guide. 

Understanding Power of Attorney in Property Transactions 

Through a formal document known as a Power of Attorney (PoA), one individual (the principal) gives another (the agent or attorney-in-fact) permission to act on their behalf. It is frequently used in real estate transactions when the borrower or buyer is unable to sign paperwork, attend meetings in person, or handle paperwork. 

For example, giving a family member a power of attorney (PoA) enables them to sign the loan agreement on your behalf if you are overseas and wish to apply for a Home Loan in India. This guarantees that your absence won't cause the process to stall. 

Although there are various kinds of powers of attorney, the two most important ones in real estate transactions are the General Power of Attorney (GPA) and the Special Power of Attorney (SPA). 

General Power of Attorney in Property Transactions

The agent is granted extensive authority to handle various facets of the principal's financial and legal affairs through a General Power of Attorney (GPA). This could include the following in real estate: 

• Taking care of several properties 
• Managing loan and banking procedures 
• Bargaining with lenders, buyers, or sellers 
• Signing agreements and contracts 

Special Power of Attorney in Real Estate

In contrast, a Special Power of Attorney (SPA) is far more detailed. It gives authority for a task that is well-defined. For instance, you could give your agent permission to:  

• Sign the loan contract for a specific Home Loan 
• Manage a single transaction or set of documents 
• Register a particular property in your name 

Differences in PoA Types

What is the actual distinction between General and Special Powers of Attorney in relation to Home Loans, then? 

• Scope of authority – While SPA is restricted to particular tasks, GPA encompasses a wide range of activities 
• Flexibility – While SPA is less flexible but more secure, GPA is more adaptable and doesn't require a new document every time 
• Validity – GPA typically endures until the principal's incapacity or revocation; SPA has a deadline or expires when the task is finished 

Other Types of PoAs

While GPA and SPA are most important when it comes to loans and real estate, it's important to remember that there are other types as well: 

• Medical PoA is usually used for decisions pertaining to health 
• Springing PoA only takes effect upon a specific event or condition 
• Durable PoA is still valid even in the event that the principal becomes incapacitated 

PoA Requirements for a Home Loan

When using a PoA for property or loan purposes, certain requirements are important to keep in mind: 

• The agent should ideally be an Indian resident who is at least 18 years old and capable of comprehending their responsibilities.  
• The PoA must be executed on non-judicial stamp paper of appropriate value, as per the state’s rules. 
• It must be notarised, with signatures of the principal, witnesses, and attesting authority. 
• Lenders often ask for identity proofs of both the principal and the appointed agent. 

Validity and Revocation of PoA

A PoA may end when: 

• The principal revokes it in writing. 
• The purpose for which it was issued is completed (especially in the case of SPA). 
• The principal dies or becomes legally incompetent (unless it’s a durable PoA). 

Consider this: You intend to purchase an apartment in Mumbai, but you are employed abroad. You give your brother permission based on his GPA. He now has the authority to handle your bank accounts, negotiate future real estate sales, and sign the Home Loan agreement. 

Now, compare that with an SPA where you authorise him only to sign one set of documents for your loan. The difference in scope is clear—the second option gives you more control while still completing the task. 

Choosing Between GPA and SPA

Your needs may determine whether you should use an SPA or a GPA. GPA might be useful if you want someone to handle a number of financial and real estate-related tasks while you are away. However, SPA might be a better option if you only require assistance with a single Home Loan or real estate transaction.  

The key consideration when deciding between a general and special power of attorney for a Home Loan is scope. Before making a decision, carefully consider your circumstances, comprehend the differences in PoA types, and make sure the PoA is correctly drafted and registered.