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Agreement for Sale:�Legal Aspects and Procedures

A comprehensive guide to property sale agreements under Indian law

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Compiled & Presented by CA Akash Jaiswal

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Index

  • Objective of RERA
  • Provisions related to Agreement for Sale under RERA
  • Contravention of provisions of RERA:
  • Introduction
  • Legal Framework Governing Agreement for Sale
  • What is an Agreement for Sale?
  • Key Elements of an Agreement for Sale
  • Legal Aspects of an Agreement for Sale
  • Registration and Stamp Duty
  • Process of Registration
  • Legal Implications of Non-Compliance
  • Provisions related to Agreement for Sale under RERA
  • Analysis of Section 13 of RERA
  • Rules related to Agreement For Sale prescribed by various RERAs
  • Process of Executing an Agreement for Sale

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Objective of RERA

Preamble of the Act:

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An Act to:

  • to establish the Real Estate Regulatory Authority for regulation and promotion of the real estate sector and;
  • to ensure sale of plot, apartment or building, as the case may be, or sale of real estate project, in an efficient and transparent manner and;
  • to protect the interest of consumers in the real estate sector and;
  • to establish an adjudicating mechanism for speedy dispute redressal and:
  • to establish the Appellate Tribunal to hear appeals from the decisions, directions or orders of the Real Estate Regulatory Authority and the adjudicating officer and for matters connected therewith or incidental thereto

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Section 2(c) of the Act defines “Agreement for Sale” as an agreement entered into between the promoter and the allottee;

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Provisions related to Agreement for Sale under RERA:

As per Section 13 of the Act:

(1) A promoter shall not accept a sum more than ten per cent of the cost of the apartment, plot, or building as the case may be, as an advance payment or an application fee,

from a person without first entering into a written agreement for sale with such person and register the said agreement for sale, under any law for the time being in force.

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(2) The agreement for sale referred to in sub-section (1) shall be in such form as may be prescribed and shall specify the particulars of development of the project including the

construction of building and apartments, along with specifications and internal development works and external development works, the dates and the manner by which payments

Towards the cost of the apartment, plot or building, as the case may be, are to be made by the allottees and the date on which the possession of the apartment, plot or building is to

be handed over, the rates of interest payable by the promoter to the allottee and the allottee to the promoter in case of default, and such other particulars, as may be prescribed.

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Analysis of Section 13 of RERA

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A promoter cannot accept an advance payment of more than 10% of the cost of the apartment, plot, or building without first entering into a written agreement for sale.

The agreement for sale must be executed and registered under applicable law before accepting any advance payment over 10%.

The agreement must be in the prescribed format and include details of:

Project development, including construction of buildings and apartments.

Internal development works (e.g., utilities, amenities within the property).

External development works (e.g., roads, landscaping, external infrastructure).It must specify the payment schedule, including dates and manner of payments by the allottee.

The agreement should state the date when possession of the property will be handed over to the allottee.

It must outline the interest rates payable by both the promoter to the allottee and the allottee to the promoter in case of default.

Any additional particulars prescribed under the law must also be included in the agreement.

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Contravention of provisions of RERA:

Section 61:

If any promoter contravenes any other provisions of this Act, other than that provided under section 3 or section 4, or the rules or regulations made thereunder, he shall be liable to a penalty which may extend up to five per cent. of the estimated cost of the real estate project as determined by the Authority.

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Introduction

Overview of Indian Property Market

  • Growing real estate sector with increasing demand for housing and commercial properties.
  • Need for a legally binding Agreement for Sale to ensure smooth property transactions.

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Key Legal Frameworks

  • Transfer of Property Act, 1882
  • Registration Act, 1908
  • Stamp Act, 1899
  • Indian Contract Act, 1872
  • Real Estate (Regulation and Development) Act, 2016 (RERA)

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Legal Framework Governing Agreements for Sale

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Transfer of Property Act, 1882 (TPA)

    • Governs transfer of immovable property.
    • Section 54: Defines "Sale" and "Agreement for Sale.“

Indian Contract Act, 1872

    • Section 10: Contracts must be made with free consent, lawful consideration, and legal object.

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Legal Framework Governing Agreements for Sale (Contd.)

Registration Act, 1908

  • Section 17: Specifies that agreements related to immovable property worth more than ₹100 must be registered.

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Stamp Act, 1899

  • Section 3: Imposes stamp duty on agreements for sale.

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RERA (Real Estate (Regulation and Development) Act, 2016

Section 2(c) of the Act defines “Agreement for Sale” as an agreement entered into between the promoter and the allottee;

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What is an Agreement for Sale?

Definition:�An agreement between the seller and buyer specifying the terms under which the property will be sold in the future.

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Key Characteristics:

  • Preliminary contract with conditions.
  • Promise to transfer property at a later date.
  • Must be in writing for enforceability.

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Difference from Sale Deed:

  • Sale Deed: Transfer of ownership.
  • Agreement for Sale: Conditional commitment to transfer property.

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Key Elements of an Agreement for Sale

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Parties Involved: Seller and Buyer (both must have legal capacity).

Property Description: Complete details including title, area, and location.

Sale Consideration: Total sale price and agreed payment schedule.

Conditions Precedent: Conditions to be fulfilled before transfer.

Rights and Obligations: Seller’s duty to transfer property, buyer’s duty to pay.

Timeline: Expected date of completion and possession.

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Legal Aspects of an Agreement for Sale

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Title of the Property: Ensure the property has a clear title and is free from encumbrances.

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Possession: Agreement may not transfer possession immediately, but outlines the date of possession.

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Conditions of Sale: Define conditions for transfer of ownership, such as payment or legal compliance.

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Breach of Contract: Consequences for breach include specific performance (under Specific Relief Act, 1963) or damages.

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Registration and Stamp Duty

Compulsory Registration:

  • Section 17 of the Registration Act: Requires registration of agreements for sale of immovable property worth more than ₹100.

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Stamp Duty:

  • Paid according to the market value of the property.
  • Varies from state to state.
  • Consequences of non-payment or underpayment include inadmissibility in court (Section 35 of Stamp Act, 1899).

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Process of Registration

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Execution of Agreement: Both parties sign the agreement.

Submission to Sub-Registrar: Agreement submitted at the local sub-registrar’s office.

Required Documents: Proof of identity, property details, and payment receipts.

Payment of Stamp Duty: Paid as per the stamp duty rate of the respective state.

Obtaining Registration: Registered after verification.

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Legal Implications of Non-Compliance

Non-Registration:

  • Agreement may be inadmissible in court (Section 49 of Registration Act).

49. Effect of non-registration of documents required to be registered.

—No document required by section 17 1[or by any provision of the Transfer of Property Act, 1882 (4 of 1882)], to be registered shall—

  1. affect any immovable property comprised therein, or
  2. confer any power to adopt, or
  3. be received as evidence of any transaction affecting such property or conferring such power,

unless it has been registered:

[Provided that an unregistered document affecting immovable property and required by this Act or the Transfer of Property Act, 1882 (4 of 1882),

to be registered may be received as evidence of a contract in a suit for specific performance under Chapter II of the Specific Relief Act, 1877

or as evidence of any collateral transaction not required to be effected by registered instrument.]

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Failure to Pay Stamp Duty:

  • The agreement becomes inadmissible in court (Section 35 of Stamp Act).

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Breach of Contract:

  • Specific Relief Act, 1963: Allows for specific performance or damages if the contract is breached.

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Contravention of provisions of RERA:

Section 61 :If any promoter contravenes any other provisions of this Act, other than that provided under section 3 or section 4, or the rules or regulations made thereunder, he shall be liable to a penalty which may extend up to five per cent. of the estimated cost of the real estate project as determined by the Authority.

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Rules in UP RERA, Haryana RERA and Delhi RERA

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The provisions related to Agreement for sale have been mentioned in Rule 3 of Haryana Real Estate (Regulation and Development) Rules, 2017.

The provisions related to Agreement for sale have been mentioned in National Capital Territory of Delhi Real Estate (Regulation and Development) (Agreement for Sale) Rules, 2016.

The provisions related to Agreement for sale have been mentioned in Uttar Pradesh Real Estate (Regulation and Development) (Agreement for Sale/Lease) Rules, 2018.

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Summary of Uttar Pradesh Real Estate (Regulation and Development) (Agreement for Sale/Lease) Rules, 2018

  • The rules stipulate that any document signed by an allottee (such as an application letter, allotment letter, or agreement) related to an apartment, plot, or building before the official signing and registration of the Agreement for Sale or Lease does not limit the allottee’s rights.
  • The format has been prescribed for executing Agreement For Sale in the state of Uttar Pradesh in these rules.

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Information required/Conditions in the prescribed format as per the UP RERA Rules:

  • Date of Execution of agreement.
  • Basic details of the parties involved:

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If either promoter/allottee is a Company

If either promoter/allottee is a Partnership Firm

If either promoter/allottee is an Individual

If either promoter/allottee is an HUF

Name of the Company

Name of the Firm

Name of the individual

Name of the HUF

CIN

 

 

 

Registered office address

Principal place of business

Address

Address

Corporate office address

 

 

 

PAN

PAN

PAN

PAN

Name of the Authorized signatory

Name of the Authorized signatory

 

Name of the Karta

Aadhar Number of the Authorized Signatory

Aadhar Number of the Authorized Signatory

Aadhar Number

Aadhar Number

Date of Board Resolution

 

 

 

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Information required/Conditions in the prescribed format as per the UP RERA Rules:

  • Details of the land on which the project is being developed like:
  • Khasra No/ Survey No.
  • Area in sqm
  • Tehsil & District
  • Details of sale/lease deed
  • Details of the landowner (in case of JDA/Collaboration Agreement)
  • Details of the JDA/Collaboration Agreement if the land is not owned by the Developer.
  • Name of the project with phase details (if any)

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Information required/Conditions in the prescribed format as per the UP RERA Rules:

  • Number of buildings, units and/or plots (with category like commercial/residential/mixed) in the project.
  • Name of the Competent Authority issuing commencement certificate.
  • Details of the Commencement Certificate like date of approval.
  • A declaration that Section 14 of the Act will be complied.
  • Details of registration in U.P. RERA like registration number & date.
  • Details of the unit booked by the allottee like:
  • Application Number
  • Date of booking
  • Apartment/ Plot No.
  • Carpet area (in sqm and sqft)
  • Floor number
  • Tower/ Wing/ Building name
  • Garage/ Covered Parking number and its area
  • Slot Number of open parking

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Information required/Conditions in the prescribed format as per the UP RERA Rules:

  • Total price of the apartment/ plot apportioned to the carpet area.
  • Rate of apartment/ plot (per sqm and sqft of carpet area)
  • Price apportioned to the garage/ Covered parking.

Note:

  1. The price is all inclusive (including GST or any other taxes & all the promised amenities)
  2. The promoter can change the price based on revision in taxes & increase in development fees/ charges by the Competent Authority, provided such change took place prior to the scheduled date of completion. The promoter shall not be allowed to modify the prices due to any reason, whatsoever, after the scheduled date of completion even if the extension has been approved by U.P. RERA and/or the Competent Authority.

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Information required/Conditions in the prescribed format as per the UP RERA Rules:

  • Discount rate for early payment by the allottee.
  • If there is a reduction in the carpet area subsequently, the promoter shall refund such excess amount along with the prescribed rate of interest within 45 days along with the interest at the rates prescribed from the date when such excess was paid.
  • If there is an increase in the carpet area subsequently by up to 3% of the carpet area of the unit, the promoter may raise a demand for the same in the next instalment as per the agreed payment plan.
  • A declaration that the allottee shall also have undivided proportionate share in the common area.

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Information required/Conditions in the prescribed format as per the UP RERA Rules:

  • The amount paid by the allottee till the time the Agreement For Sale is entered into.
  • A detailed payment plan.
  • Schedule of possession of the unit concerned and common areas.
  • A declaration that in the event of Force Majeure condition when it becomes impossible for the promoter to complete the project, the promoter shall terminate the agreement after giving a days notice and refund the entire amount received from the allottee within 120 days from date.
  • A declaration that the promoter shall offer possession of the unit, in writing, within 2 months from obtaining CC/OC.

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Information required/Conditions in the prescribed format as per the UP RERA Rules:

  • A declaration that the promoter will execute conveyance deed as per the local laws or within 3 months (in absence of local laws) from obtaining CC/OC. Also that he will hand over CC/OC to the allottee at the time of conveyance.
  • A declaration that the allottee will pay as holding charges Rs. 2/month per sqft (carpet area) in case of apartment and Rs. 1/month per sqft of plot area in case of plot, beyond 3 months till actual date of possession.
  • Photos of both the parties (of authorized person in case of artificial persons) to be affixed on the Agreement.

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Information required/Conditions in the prescribed format as per the UP RERA Rules:

  • A condition that if the allottee cancels the booking without any fault of the promoter, then promoter shall refund 50% of the amount within 45 days from cancellation and balance 50% on reallotment of the unit or 1 year from cancellation date, whichever is earlier.
  • The rate of interest prescribed is SBI MCLR+1%, which shall be payable by the promoter to a non-defaulting allottee for the delay in giving possession, which will become within 45 days from it becoming due.
  • Allottee-in-default is defined as the allottee who fails to make payments for 2 consecutive months and is thereafter liable

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Information required/Conditions in the prescribed format as per the UP RERA Rules:

  • If the allottee does not pay instalments for 2 consecutive months after the promoter’s notice also, the allottee shall be liable to pay interest for such delay at SBI MCLR + 1%.
  • The promoter has an option to terminate the booking of the allottee in case of non-payment of 3 months’ instalments but only after intimating at least 30 days prior to such termination.
  • The price of the unit should include the cost of maintenance for 1 year from the date of CC/OC.
  • If the AOA is not formed within 1 year, the promoter will be entitled to charge cost of maintenance as mentioned in the AFS +10 %(for price escalation).
  • The promoter shall be liable to pay the balance available with him to AOA for maintenance once the AOA is formed.

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Information required/Conditions in the prescribed format as per the UP RERA Rules:

  • In case of structural defects occurring in the unit within 5 years from the date of possession or the date of obligation of the promoter to give possession, it shall be the responsibility of the promoter to rectify such defects within 30 days without any charges.

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Differences in the Format and requirements of Agreement For Sale in Uttar Pradesh, Delhi & Haryana :

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Particulars

Uttar Pradesh

Haryana

Delhi

Refund of money in case of cancellation of booking by the allottee without any default of the promoter

The promoter will be liable to return 50% of the amount paid by the allottee within 45 days of such cancellation and the balance 50% within 45 days of reallotment or 1 year from cancellation, whichever is earlier.

The promoter will be liable to return the amount paid by the allottee within 90 days of such cancellation. The Promoter shall be entitled to interest by the allottee at SBI MCLR+2%

The promoter will be liable to return the amount paid by the allottee within 45 days of such cancellation.

Inclusion of Cost of Maintenance in the cost of unit

The price of the unit should include the cost of maintenance for 1 year from the date of CC/OC.

No such provision in the Rules.

No such provision in the Rules.

Prescribed rate of interest for delay

SBI MCLR + 1%

SBI MCLR + 2%

SBI MCLR + 2%

Liability of the allottee in case of failure to take possession

The allottee will pay as holding charges Rs. 2/month per sqft (carpet area) in case of apartment and Rs. 1/month per sqft of plot area in case of plot, beyond 3 months till actual date of possession.

No holding charges mentioned in the Rules.

No holding charges mentioned in the Rules.

Type of Project

Residential, Commerrcial & Other

Residential, Commerrcial, Industrial, IT & Other

Residential, Commercial & Other

The provisions/ requirements of the rules of all the three are same except for the differences in table below:

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Process of Executing an Agreement for Sale

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Negotiation and Drafting: Terms are agreed upon by both parties.

Payment of Advance: An advance amount is usually paid by the buyer.

Execution and Registration: Signed by both parties and registered with the sub-registrar.

Final Sale Deed: Upon fulfillment of conditions, a Sale Deed is executed.

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Thank you

CA Akash Jaiswal

Contact: +91 9205091730

Email: akashjaiswalca@gmail.com

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