Agreement for Sale in Bangalore: The Clauses a Flat Buyer Should Read
A buyer of a new or under-construction flat signs one main contract with the builder: the agreement for sale. Many people call it the builder-buyer agreement. This guide goes through its main clauses one by one, explains what the RERA Act and the Karnataka rules require of each, and lists the wording a Bangalore buyer should question before signing.
What the Agreement for Sale Does
This agreement records the promise to sell a particular flat at a stated price, on stated dates. It fixes the home, the price, the instalments, the handover date and what follows when either side fails. Ownership passes only later, through the registered sale deed.
The brochure, the cost sheet and the sales conversation carry little weight once the agreement is signed. A regulator or a court reads the signed agreement and its annexures first. A promise that matters, such as a clubhouse, a specification or a parking space, therefore belongs in the agreement in writing.
The 10% Rule and Registration
Section 13 of the RERA Act limits what a builder may collect before the agreement exists. A promoter may take up to 10% of the flat's cost as an advance or as an application fee. Any payment beyond that requires a signed and registered agreement for sale.
The same section lists what the agreement must contain. The main items are these:
- The particulars of the project, including the building, the flat and its specifications
- The internal and external development works
- The dates and the manner of each payment
- The date on which possession is to be handed over
- The interest each side pays on default
A demand for 20% or 30% against a booking form alone runs against this section. The safe order is to read the draft agreement first, pay within the 10% limit, and pay the rest only after registration at the sub-registrar office.
The Karnataka Model Form
The Karnataka RERA rules prescribe a model form for the agreement for sale. Builders of registered projects are expected to follow it, and a pro forma of the agreement is filed with the project's registration. The filed pro forma is open to view on the project's page of the Karnataka RERA portal.
Comparing the builder's draft with the filed pro forma is a useful first check. Extra clauses added by the builder are valid only where they stay within the Act and the rules. A clause that takes away a right given by the Act is open to challenge before the authority.
Clauses on the Home and the Price
The first group of clauses describes what is being bought and what it costs. Each figure here should match the cost sheet and the project's RERA record.
Carpet area
Carpet area under the RERA Act is the usable floor space inside the flat. It leaves out the external walls, service shafts, the exclusive balcony or verandah and the exclusive open terrace, and it includes the internal partition walls. The agreement should state this carpet area in sq ft, with the balcony and terrace areas shown separately.
The final carpet area is confirmed after construction. The agreement should say how the price is adjusted when the measured area differs, and how soon any excess money is returned. The schedule should also carry the floor plan of the flat itself.
Total price and extras
The total price clause should give one figure with its break-up: the basic price, parking, clubhouse, deposits, GST and other taxes. Under the model form, the total is free of escalation, apart from increases in taxes or in charges payable to an authority. Wording that allows unnamed charges to be added later should be removed or made specific.
Stamp duty and registration are paid by the buyer over and above this total. In Karnataka, a home above Rs. 45 Lakhs attracts stamp duty of 5%, or 5.6% with cess and surcharge, and a registration fee of 2%. The EMI calculator shows these upfront costs along with the monthly instalment.
Payment Schedule
The payment schedule is usually a table in an annexure. In a construction-linked plan, each instalment falls due when a stage of work is completed, such as the foundation, a floor slab or the finishing. Money then follows progress that is visible on site.
Three points deserve a careful read. The first is whether each instalment depends on a stage of work or only on a calendar date. The second is the notice period for each demand. The third is the interest on a late payment, which the rules set at the same rate the builder pays on its own delay.
Possession Date and Delay
The possession clause should carry a calendar date. Wording such as "tentative" or "subject to approvals" makes a delay hard to measure. The handover date should also agree with the completion date on the project's Karnataka RERA record.
Section 18 of the RERA Act gives the buyer two choices when the builder misses the date. One is to leave the project and take back the whole amount paid, with interest. The other is to stay on and be paid interest for each month of delay, up to the handover.
Rule 16 of the Karnataka rules sets this interest at two percentage points above the highest marginal cost of lending rate (MCLR) of the State Bank of India. The same rate applies to a buyer who pays late. A draft that offers a small fixed sum per sq ft when the builder is late, while charging the buyer 18% or 24%, departs from the rule.
The force majeure clause lists events that extend the date. It should be limited to events outside the builder's control, such as a flood, an earthquake or a war. Shortage of labour, a rise in material prices and a delay in the builder's own approvals are business risks that belong to the builder.
Cancellation and Refund
The agreement should state what happens when the buyer cancels and when the builder cancels. Under Section 11 of the Act, a promoter may cancel an allotment only in terms of the agreement for sale. The clause should therefore name the number of missed instalments and the written notices that come before a cancellation.
The deduction on a cancellation by the buyer should be a stated share of the price. A clause that forfeits everything paid is open to challenge. Rule 17 of the Karnataka rules requires a refund that has become due to be paid within sixty days, with the applicable interest.
Changes to the Plan
Section 14 of the Act protects the plan the buyer saw at booking. Additions or alterations to the flat's sanctioned plan, layout and specifications need the previous consent of that buyer. Other changes to the sanctioned plans or the common areas need the previous written consent of at least two-thirds of the allottees.
Some drafts include a general consent to any future revision, extra floors or added towers. Signing such a clause may be read as consent given in advance. Buyers should have it struck out, or limited to minor changes required by an authority.
Defects, Common Areas and the Sale Deed
Under Section 14(3), the builder remains liable for five years from possession. The liability covers the structure, the workmanship, the quality and the services provided. A defect brought to the builder's notice within that period has to be rectified within thirty days, without further charge.
The agreement should also cover the handover of the building to its owners. Section 17 requires the builder to execute a registered conveyance deed for the flat, with its undivided share in the common areas. The common areas go to the association of allottees. Section 19 asks the buyer to take possession within two months of the occupancy certificate, so the clause on maintenance charges from that date deserves a read.
Clauses to Question at a Glance
The table below sets the common one-sided wording against what the law provides.
| Clause | Wording to question | What the law provides |
|---|---|---|
| Possession | A tentative date or an open-ended grace period | A stated date, with interest or refund on delay (Section 18) |
| Interest | A high rate for the buyer and a token sum for the builder | One rate for both sides (Rule 16) |
| Price | A right to add charges later | A total price with its break-up, fixed except for taxes |
| Plans | Blanket consent to future changes | Previous consent of the buyer or of two-thirds of the allottees (Section 14) |
| Defects | A one-year or two-year warranty | Five years from possession (Section 14) |
| Cancellation | Forfeiture of everything paid | Cancellation only in terms of the agreement, with refund in sixty days (Rule 17) |
Steps Before Signing
A draft is easier to change before signing than after registration. The usual order of work is this:
- Ask for the full draft with every annexure before paying more than the booking amount.
- Download the pro forma agreement filed for the project on the Karnataka RERA portal and compare the two.
- Match the carpet area, the flat number, the parking and the possession date with the cost sheet and the RERA record.
- Mark every clause that differs from the points above and send the list to the builder by email.
- Have a property lawyer read the final version, along with the title documents.
- Sign and register the agreement, and keep the registered copy with every receipt.
Our team helps buyers of new homes across Bangalore collect the draft agreement and the project's RERA documents before booking. Send the project name through the contact page and we will share what is on record.