Sale Agreement and Construction Agreement: The Two Papers Behind an Under-Construction Flat in Bangalore
Buyers of an under-construction flat in Bangalore are often handed two contracts in place of one. The first is an agreement to sell an undivided share of the land, and the second is a construction agreement for the flat. This guide explains what each paper does, how RERA treats the pair, where stamp duty and GST fall and what to check before signing.
Why a Flat Is Split Into Land and Building
An apartment owner holds two things. One is the flat itself, and the other is an undivided share (UDS) in the land under the whole project. At the booking stage only the land exists, so the developer promises to sell the land share and, separately, to build the flat.
The split has a long history in the city. A large number of Bangalore projects are built under joint development, where a landowner brings the site and a developer builds on it. Two contracts allow the landowner to promise the land share while the developer takes on the building work.
The Agreement to Sell the Undivided Share
This agreement deals with land alone. It identifies the full project site in a schedule and then the buyer's share, usually as a figure in sq ft and as a percentage. It also records the price for that share and the parties who own the land.
The agreement is a promise to convey, and ownership passes only when the sale deed is registered. Its most important figure is the UDS itself. That share decides the owner's stake in the land at the time of redevelopment or acquisition, so it should match the share printed for the same flat in the project documents.
The Construction Agreement
The construction agreement is the contract to build. It describes the flat by number, floor and tower, and it carries the details a buyer cares about most from day to day. A vague construction agreement is a weak one, however well the land agreement is drafted.
A sound construction agreement covers these points:
- The carpet area of the flat and the plan it follows
- Specifications for structure, flooring, doors, windows, kitchen and bathrooms
- The payment schedule, stage by stage
- The date for completion and handover
- Interest payable by either side for delay
- Parking, amenities and the share of common areas
How the Two Papers Compare
The table sets the two agreements side by side.
| Point | Agreement to sell UDS | Construction agreement |
|---|---|---|
| Subject | Undivided share in the project land | Building and delivering the flat |
| Usual first party | Landowner, developer or both | Developer |
| Key figure | UDS in sq ft and percentage | Carpet area and specifications |
| Price covered | Cost of the land share | Cost of construction |
| What follows | Registered sale deed | Possession of the finished flat |
A home is delivered only by the two papers together. The two must describe the same flat, name the same buyer and add up to the full price agreed at booking. A clause in each should also say that a default under one is a default under the other.
Where RERA Fits
The Real Estate (Regulation and Development) Act, 2016 speaks of a single "agreement for sale". Section 13 bars a developer from taking more than 10% of the cost before that agreement is signed and registered. Karnataka notified a model form of the agreement in 2020, and many developers in the city have since moved to one combined contract.
Where a registered project still uses two documents, the buyer's rights under the Act apply to the whole purchase. The carpet area, the total price, the possession date, interest for delay and the five-year defect liability hold good across both papers. A clause in either contract that cuts against the Act gives way to it.
The practical test is simple. Read together, the two agreements should carry everything the Act expects of an agreement for sale. If the possession date or the delay interest appears in neither, the gap should be closed in writing before any further payment.
Stamp Duty, Registration and GST
Three charges apply to an under-construction purchase, and each attaches to a different part of it. GST is charged on the construction of the flat, while stamp duty and the registration fee are paid when the sale deed is registered. A flat bought after the occupancy certificate carries no GST.
GST on an under-construction flat is 5%, or 1% for affordable housing, with one-third of the price treated as land. The deduction is built into those rates, so the tax is worked out on the combined value of both agreements. Splitting the price between land and building therefore leaves the GST bill unchanged.
Stamp duty in Karnataka is 5% on property above Rs. 45 Lakhs, which becomes 5.6% with cess and surcharge, and registration costs 2%. A sale deed signed after completion conveys the flat with its land share, and duty is paid on the full value. The value used is the higher of the price and the government guidance value.
As an illustration, take a flat priced at Rs. 90 Lakhs in total:
- GST at 5%: Rs. 4.5 Lakhs, paid with the instalments
- Stamp duty at 5.6%: Rs. 5.04 Lakhs, paid at the sale deed
- Registration at 2%: Rs. 1.8 Lakhs, paid at the sale deed
The Karnataka High Court held in 2025 that stamp duty follows the contents of the deed. A deed that conveys only an undivided land share is charged on that share. The ruling is no licence to understate value, and a price shown below the real figure creates tax and title trouble later. Monthly outgo on the loan can be tested on our EMI calculator.
The Sale Deed Completes the Purchase
Both agreements lead to one final document. Section 17 of the Act requires the developer to execute a registered conveyance deed in favour of the buyer. In the usual course this happens after the occupancy certificate, and the deed should describe both the flat and the undivided share.
The figures in the deed deserve a last check. The UDS, the carpet area, the parking space and the flat number must match the two agreements. An error found after registration needs a rectification deed, which costs time and money.
The Home Loan and the Tripartite Agreement
A lender financing an under-construction flat asks for both agreements, since the loan covers the land share and the building cost together. Many banks also sign a tripartite agreement with the buyer and the developer. It records that the loan is released in stages, in line with construction, and that the developer will hand the title deeds to the bank.
The payment stages in the construction agreement should match the stages in the bank's sanction letter. A mismatch leaves the buyer paying a stage from savings while the bank waits for its own milestone. The tripartite agreement adds to the two contracts and replaces neither.
Checks Before Signing
Because the purchase is spread over two papers, the checks have to cover both. A property lawyer should read them together, in draft, before the first is signed.
- The UDS figure matches the share shown for that flat in the project's filings
- The landowner has signed, or the developer holds a registered power of attorney to sign
- Both agreements name the same flat, tower, floor and parking space
- The two prices add up to the total on the cost sheet
- The possession date and the delay interest are written down
- The specifications are attached as a schedule and are specific
- The agreement is registered once more than 10% of the cost is to be paid
- A default or cancellation clause treats both agreements as one deal
Buyers who are offered a single RERA agreement for sale have a simpler job, since every term is in one place. Those who receive the older pair lose nothing in law, provided the two documents are complete and consistent. Our team is happy to help collect the draft agreements for a project through the contact page.
