Builder Transfer Fees on an Under-Construction Flat in Bangalore

A buyer who books a flat during construction sometimes needs to sell it before the building is ready. At that stage the flat is still held on an agreement with the developer, and the developer charges a transfer fee to put a new buyer's name on the booking. This guide explains what the fee is, when a transfer is allowed, what it costs both sides and how the process runs for projects in Bangalore.

What a Transfer Fee Is

Until the sale deed is registered, the buyer of an under-construction flat holds a contract and not the property itself. The agreement for sale gives the right to receive the flat on completion, on the terms and price written in it. Selling at this stage means passing that right to another person, and the developer must accept the new buyer in place of the old one.

The transfer fee is the charge the developer collects for that change. It is also called an assignment fee, a nomination fee or an endorsement charge. The fee is set by the contract and goes to the developer, so it is unrelated to the stamp duty and registration fee that the government collects on a sale deed.

The Real Estate (Regulation and Development) Act recognises such a sale. Its definition of an allottee includes a person who later acquires the allotment through sale or transfer. The incoming buyer therefore steps into the same protection under the Act as the first buyer, including the registered completion date.

How Developers Calculate It

The Act and the Karnataka rules set no fixed rate for the fee, so the agreement decides it. Three methods are common in the city:

• A rate per sq ft, applied to the saleable area of the flat
• A percentage of the agreement value
• A fixed administrative sum for each transfer

GST at 18% is charged on the fee, since it is a payment for a service. A simple example shows the effect. At a rate of Rs. 200 per sq ft on a flat of 1,500 sq ft, the fee is Rs. 3 Lakhs, and GST takes the bill to Rs. 3.54 Lakhs.

Some developers waive or reduce the fee for a transfer to a spouse, a parent or a child. A few waive it during a sales scheme. Any waiver should be written into the agreement or confirmed by a letter from the developer, since a verbal promise from a sales office is hard to enforce later.

When a Transfer Is Allowed

The assignment clause in the agreement for sale sets the conditions. Most agreements follow the pattern below:

• The developer's written consent is needed for every transfer
• A minimum share of the price, or a set number of instalments, must be paid first
• All dues, including interest on late instalments, must be cleared
• Some agreements bar any transfer for a fixed period after booking
• A transfer is possible only until the sale deed is registered

The last point marks a clear line. Once the sale deed is registered, the flat belongs to the buyer and the developer has no say in a resale. A sale after that is an ordinary resale between two owners, with stamp duty and registration on a new deed and, in many projects, a transfer charge payable to the owners' association.

Why Developers Charge the Fee

Developers give two reasons. The first is the work involved: fresh agreements, updated records, new demand letters and coordination with the lenders on both sides. The second is to slow down buyers who book only to resell within months, since frequent resales at lower prices compete with the developer's own unsold flats.

For a buyer, the fee is best treated as a known cost of leaving early. A clause that allows a transfer for a stated fee is more useful than one that leaves the decision and the amount to the developer. The time to compare these clauses is before booking, when two projects are still being weighed against each other.

The Transfer Process Step by Step

A transfer involves the seller, the incoming buyer, the developer and often two banks. The usual order of work is as follows:

1. Read the assignment clause and ask the developer's customer team for the fee, the GST and the conditions in writing
2. Clear all instalments and interest due up to the date of transfer
3. Obtain a statement of account that shows every payment received by the developer
4. Close the seller's home loan, or obtain the lender's consent and the release of the documents
5. Agree the price with the incoming buyer and record it in a written agreement
6. Pay the transfer fee and sign the transfer papers with the developer
7. Collect the developer's letter that confirms the incoming buyer as the allottee

The transfer papers are usually a three-party deed signed by the seller, the incoming buyer and the developer. The stamp duty and registration applicable to that deed should be confirmed with a property lawyer before signing. The sale deed for the flat is later registered directly between the developer and the incoming buyer.

What the Incoming Buyer Should Check

A buyer who takes over a booking pays the seller for the instalments already paid, usually with a premium, and pays the developer the balance. The checks below protect that money:

• The original agreement for sale, the allotment letter and all payment receipts
• The developer's statement of account, matched with the receipts
• The RERA registration, the completion date and the latest progress update for the project
• The developer's written consent and the confirmation letter in the new name
• A closure letter from the seller's lender, where the booking was financed
• The balance price, the remaining GST and the charges due at possession
• The stamp duty and registration on the final sale deed

The price in the original agreement stays fixed, which is the attraction of a transfer in a rising market. The premium paid to the seller is outside that agreement, and a bank may lend only against the agreement value and the stage of construction. The buyer should confirm the loan amount early, and our EMI calculator shows the instalment for the sum borrowed.

Tax and Other Costs for the Seller

The profit on the sale of a booking is taxed as a capital gain on the transfer of a right in property. The period of holding decides whether the gain is short-term or long-term, and the transfer fee paid is part of the cost of the sale. A chartered accountant should work out the tax before the price is agreed.

GST paid on earlier instalments stays with the flat and is not refunded to the seller, so it is normally recovered through the price. Brokerage, the loan closure charge and legal fees add to the cost. A seller who adds these to the transfer fee sees the true gain from the sale, which is often smaller than the rise in the quoted price suggests.

Disputes Over Transfer Fees

Disputes arise when a developer demands a fee that the agreement leaves unstated, raises the rate after booking or refuses consent without a reason. The first step is a written request that cites the clause in the agreement. A buyer in a registered project may then file a complaint with the Karnataka RERA authority, which hears disputes between allottees and promoters.

The strength of such a complaint depends on the wording of the agreement. A fee printed in a signed agreement is difficult to challenge, while a demand with no basis in the contract is far weaker. This is one more reason to read the assignment clause with care at the time of booking.

Points to Settle Before Booking

Buyers who expect a job move, a change of city or a shorter holding period should settle the transfer terms at the start. The questions below cover the essentials:

• Whether the agreement allows a transfer before the sale deed
• The fee, the method of calculation and whether GST is extra
• The share of the price to be paid before a transfer is allowed
• Whether a transfer to a family member is free
• The time the developer takes to complete a transfer

Clear answers in the agreement keep an early exit simple and its cost predictable. We read these clauses with buyers for the projects we market, and our team can be reached through the contact page.