Brokerage in Bangalore: Who Pays, GST and What to Agree in Writing
Brokerage is the fee a property agent earns for bringing a buyer and a seller together. In Bangalore it is settled by agreement, and many disputes start because nobody wrote that agreement down. This article explains who pays the fee, what the law says about it, how GST is added and what a buyer should fix in writing before the search begins.
What Brokerage Covers
The RERA Act of 2016 defines a real estate agent as a person who negotiates or acts for another in the transfer of a plot, apartment or building. The same definition says the agent receives remuneration, fees or other charges for the service, as commission or otherwise. Brokerage is that payment.
The work behind it differs from one deal to the next. Some agents only introduce the two sides. Others arrange visits, collect the title papers, negotiate the price and stay with the file until registration. The fee is easier to judge when the list of tasks is agreed along with it.
What the Law Says About the Rate
The RERA Act regulates who may act as an agent and how the agent must behave. Section 9 requires registration before an agent facilitates a sale in a registered project. Section 10 lists the duties, such as keeping records, avoiding false statements and helping the buyer obtain documents at booking. Section 62 sets the penalty for a breach at Rs. 10,000 a day.
The rate of commission is left to the parties. The Act fixes neither a percentage nor an upper limit, so the fee is a matter of contract between the agent and the client. A statement that a certain percentage is "the legal rate" has no basis, and a buyer is free to negotiate it like any other term.
Who Pays in a Resale and in a New Project
The answer depends on the kind of purchase. The two common cases work differently:
- Resale home: the seller and the buyer usually each pay the broker who represents them, as a percentage of the sale price
- New project: the developer normally pays the commission of the agent or channel partner, and the buyer pays the developer's price
In a resale, the percentage is set by local custom and by negotiation. A buyer dealing with a seller's broker should ask plainly whether a fee is expected from the buyer's side as well. One broker may act for both sides, and then each side should know what the other is paying.
In a new project, a buyer should ask the agent at the first meeting whether any fee is payable by the buyer. Bangaloreprop charges buyers no brokerage on the projects booked through it, as set out on the About page. The price and the cost sheet come from the developer in every case.
GST on Brokerage
Brokerage is a service, and real estate services on a fee or commission basis are taxed at 18% under GST. That is 9% central tax and 9% state tax on the fee, with the price of the home left out of the calculation. A broker must register for GST once turnover from services crosses Rs. 20 Lakhs in a financial year.
A registered broker adds the tax to the fee and issues a tax invoice that shows the GSTIN, the fee and the tax as separate lines. A broker below the limit who has no registration cannot collect GST. A demand for "tax" without a GSTIN on the bill should therefore be questioned.
The figures below show a home bought for Rs. 1.2 Crore, with 1%, 1.5% and 2% used purely as illustrations:
| Rate agreed | Brokerage | GST at 18% | Total payable |
|---|---|---|---|
| 1% | Rs. 1,20,000 | Rs. 21,600 | Rs. 1,41,600 |
| 1.5% | Rs. 1,80,000 | Rs. 32,400 | Rs. 2,12,400 |
| 2% | Rs. 2,40,000 | Rs. 43,200 | Rs. 2,83,200 |
The difference between a quote "with GST" and a quote "plus GST" is Rs. 43,200 in the last row. The quote should say which of the two it is.
Terms to Agree in Writing
A short email or a one-page letter is enough, as long as both sides confirm it. It should be exchanged when the broker starts showing homes, well before a deal is close. These points belong in it:
- The rate, or a fixed sum in rupees
- The amount the rate applies to, which should be the sale price in the sale deed
- Whether GST is included or added
- Who pays, and whether the broker is also being paid by the other side
- The stage at which the fee becomes due
- The work covered, such as visits, document collection, negotiation and help at registration
- What happens to the fee if the sale falls through
A fixed sum has one advantage over a percentage. The broker then gains nothing from a higher price, which matters to a buyer who wants the price pushed down. Buyers who prefer a percentage should name the base clearly, so that stamp duty, registration and furniture are kept out of it.
When the Fee Should Be Paid
The fair point for payment is completion, which for a sale means registration of the sale deed. Until then the deal may still fail on title, on the loan or on the seller's side. An introduction or a verbal agreement on price is too early for the full fee.
Some brokers ask for part of the fee when the sale agreement is signed. That is a reasonable middle course when the balance waits for registration and the written terms say what is returned on a failed sale. Payment should go by bank transfer against an invoice or a signed receipt, never as unrecorded cash.
One Broker for Both Sides
A broker who is paid by both the seller and the buyer earns the fee only when the sale closes. The broker's interest is the closing, while the buyer's interest is the lowest fair price and clean papers. These two aims overlap, yet they are different.
The practical answer is to verify independently. The buyer should compare the price with registered sale values and the guidance value for the street. A lawyer chosen by the buyer, and paid by the buyer, should read the title papers. The broker's view on either point is one input among several.
Brokerage in the Full Cost of Buying
Brokerage is one of several payments beyond the price. In Karnataka, stamp duty with cess and surcharge is 5.6% for a home above Rs. 45 Lakhs, and registration is 2%. Legal fees, loan processing charges and society transfer charges come on top of these.
On a home of Rs. 1.2 Crore, stamp duty and registration at 7.6% add Rs. 9.12 Lakhs. Brokerage at an illustrative 1% with GST adds Rs. 1,41,600 more. A home loan is sized on the value of the property, so these costs normally come from the buyer's savings.
Checking the Agent
An agent who sells homes in RERA-registered projects must hold a K-RERA agent registration and quote the number. A buyer should ask for it and look it up on the Karnataka RERA portal before sharing documents. The portal entry gives the name the registration was issued in and the dates it covers.
A resale home in an old building is usually outside RERA, and the broker there may hold no registration. The buyer's safeguards in that case are the written fee terms, payment through the bank and an independent title check. Questions about a project shown on this site may be sent through the contact page.
