I’m planning to buy an apartment in Bangalore. Currently , the building is about 80% complete. Builder says that it will take another 3-4 months to offer possession. Thereafter , it’ll take another 3 months to get OC and get registration done. I want to buy the property on self-finance, so no bank loan for me. I offered him a plan of 20% of down payment at the time of sale agreement. Rest 80% at the time of registration whenever that happens. But he is not agreeing to it. He is demanding 90% payment at the time of sale agreement and only allowing 10% to be left for registration. Since, I’m paying the amount from self account , I’m a bit hesitant about paying him almost 90% without registration. The flat itself is about 80% complete till now and things are a bit slow due to current labour shortage in Bangalore. Also, he insists that registration will be done only after building gets the OC(occupany certificate). But after 3-4 months we can move into the apartment even though registration will take more time. In this case how safe is the sale agreement to prove ownership of the apartment ? How can I ensure that building gets OC and registration on time ? Other option is to wait till the building is fully complete and received OC and then buy it in ‘Ready-to-Move’ status. But by then the flat of my choice may not be available to buy.
Only 10% at the time of agreement to sell and delivery time with OC must mention in agreement. Paying such huge amount in advance is not advisable.
OC dose not issue so easily and you may suffer for delay possesion and also no surety of completion of project in given time and your money will stuck with no option.
There are no buyers of any flats at present
wait till building is completed OC issued then buy flat by making full payment and execution of registered sale deed in your favour
3) don’t make 90 per cent payment unless builder executes registered agreement in your favour
Don't go for Agreement to sale if you have all money with you. Ask builder to perform sale deed and pay 90% and 5% possession and 5% once he gets OC.
Otherwise you may think to buy another property let it be 20 years old or second hand property. In second hand property you may get chance of re development of building and extra sq ft in new construction.
plus you can get possession immediately risk factors are very low. can choose the well settled and posh area. you can search the property accordingly to school, market , hospital, on walk-able ... think from all the way.
1. Payment f 10% of total value of flat at the time of sale agreement is common while it is extended upto 30% in self financing cases.
2. The demand for 90% money at the time of sale agreement is something unheard of and it smacks of some danger. hence I can not advise you to go for this on this scheme.
3. The registration must be done after OC is obtained to ensure the clear title of flat and hence major part of money must be kept hold till the date of registration. The demand of the builder for 90% before registration gives a strong hint of some defect in the title.
4. Anyway you can cross check my advise with a local lawyer who may manage to see the relevant deeds .
1. Do not pay 90% at the time of agreement of sale itself.
2. Better to wait till OC is received and the building will be ready by that time and it will be ready to move.
Dear Sir,
To be frank the conduct of this builder is something fishy. The matter needs to be discussed with an expert. Further it is advisable to go for ‘Ready-to-Move’ when OC is ready and say you will pay token advance
of 10% to reserve your choice flat. In bengaluru getting OC is very problematic and paying 90% is not advisable at any cost and I am saying this out of my long experience.
You can't ensure the oc. It's builders liability. I don't think paying 90 percent without registration is proper term. It's better you pay it during registration.
1. first thing - possession can only be offered when the OC is in place. So the builder cannot handover possession without an OC. It is plain illegal
2. as the builder is not agreeable to your offer, ask him to share with you the construction linked payments which are provided to other buyers who pay the builder in installments based on the stage of construction
3. you can then ask the builder to apply the same construction linked payment for you as well
4. it is better if you could get the certified copy of a sale agreement from the registrar's office [the latest agreement which is registered by the builder] to know the construction linked payment offered to other buyer who are paying in installments.
5. the builder has given you a timeline of upto 6 months for registration and possession. However i would never believe that due to the lockdown. He may be pressed for funds and would take more than 6 months to complete the project
6. also if you pay a substantial sum of money before OC, you will have to pay GST at 5%. However if substantial money is paid upon or after receipt of OC, GST will not be payable. You need to factor that in
7. if you think that the apartment is a good deal and you dont want to lose on it and also if the builder is insisting for 90% payment then insist for registration. The builder cannot delay registration of sale agreement. As per RERA the builder is mandated to register the agreement on receipt of 10% of consideration. In your case the builder would be receiving 90%. So how on earth can he even tell that pay 90% now and registration will be done later? its plain illegal
8. also if you wait till the OC is received and apartment is ready to move, the builder may not offer the same rate as he is offering you now. Finished apartments are generally expensive than unfinished ones. So thats a commercial decision you have to make for which lawyers cannot advise
1. Typically Builder sells Flat via a "Agreement to Sale" (not Sale Deed), collects major money and then gives possession. On possession & OC, "Sale Deed" (which is a final Title Deed /conveyance document) is executed.
2. IF the builder is ready for above, THEN you are advised to go ahead. IF above is not possible, THEN avoid putting your hard earned money at risk. There will be several other opportunities since overall property market is down.
You can insist for registration of the sale agreement if this is your present situation. That is the only way you can protect your investment against this builder.
In order to ensure the builder obtains the OC for the project at his own cost before proceeding for registration, include this as an important condition or clause in the sale agreement as well, that way you can be rest assured that the builder obtains the OC before registration. Also in case of default by the builder you can include a penalty clause in the sale agreement.
By registering the sale agreement, the E.C will reflect it until cancellation. Hence this is fool proof evidence upto the time of registration of sale deed in your favour.
It is better to get these cleared through an advocate if doubts still persist.
One followup question is builder says that if I were to buy taking a bank loan then the bank will release almost all the funds immediately(after loan sanction) to builder. He says that's because his building is 80% complete and banks release fund based on completion status. I don't know how far this is true or not. But he is using this logic as an argument to say that I should also release 90% funds month before registration in the self-finance payment option. Does his argument have any merit since I cannnot afford to risk all savings before registration like a bank?
Don’t make 90 per cent payment unless registered agreement is executed by builder in your favour
you don’t know whether OC would be issued for project or not
whether building has been completed as per sanctioned plans
Even if you avail a bank loan, where is the bank taking the risk, it is borne by you indirectly. Yes the builder is correct when he says that if you were to obtain a bank loan, the bank would release 90% of the loan amount straight away and the balance of 10% only at the time of final registration.
Adopt the procedure laid out in my earlier reply and proceed if you are keen on not losing out a flat in this project. Make all payments via bank transfer or A/c payee cheque only. Do not forget to collect a receipt at any cost.
He is correct bank release 80% amount but bank takes for mortgage document as "Sale Deed". without sale deed bank don't reimburse the cheque to builder.
First of all bank will not release whole amount to him.
Do not pay 90% on sales agreement.
- As per Sub-Section 1 of Section 13 of The Real Estate (Regulation and Development Act, ) , A builder will have to enter into an agreement to Sell with a home buyer , and then accept the booking amount which should not be more than 10% .
Hence demanding 90% payment at the time of sale agreement and only allowing 10% to be left for registration is against the Law.
- Further, if you pay the amount demanded by the said builder against the Act , then you may face problem , specially when the builder could not get OC etc from competent authority or delay in handing over the possession.,
- The builder is hiding the real rule of sanction of loan from a Bank, as the bank will sanction the amount in the name of you , and not the builder , and generally at the time of construction , bank used to credit the account of builder with 80% amount of loan, but it not applied if you are paying amount from your pocket .
- Being a legal adviser , my suggestion would be , dont go against the rule made under section 13 , as i stated above.
Your proposal is perfect i.e., 20% on agreement and 80% at the time of registration.
Going by present situation of pandemic and lock down, it is advisable not to offer more than 10% as advance.
Strict "NO" for payment of 90% advance, if you can wait till building is completed, you can pay balance 80% and get the same registered.
It is advisable to wait till building is completed in all respects and ready-to-move.
If you pay 90% as desired by Builder you will be purchasing problems & litigation, which can be avoided.
You cannot get everything at one stroke.
If you are worried about the delay in getting the property registered and possession then you better don't get into this deal at all, let him complete the same so wait and take possession at that time.
Now if he is insisting on 90% payment and is ready to enter into a registered sale agreement then he cannot retreat from his commitment.
However you may get the time stipulated for possession and also registration of the property along with OC and have a mention about penal interest for the period of delay beyond the stipulated period and the grace period attached to the condition.
This may protect your interests in all the angles.
The decision is yours.
Reply to your Followup question:
The statement is interpreted by Builder to suit his argument, the Banks will release the loans on stage basis against security (in your case there is no security, you will be at his mercy).
Going by 80% completion i.e., only bare shell is made ready and substantial work needs to be done, as such, his argument is not acceptable.
As on today, the building is 80% completed, OC is still pending, and that, still 20% work is pending, as such, there is no security & guarantee of completion to your 90% down payment. (Take into consideration lock down and directions from Central and State Governments).
Thus, is it not advisable to risk your hard earned money, more particularly there is element of doubt about completion of building and obtaining OC.
The builder may tell thousand reasons and may try to convince you by uttering illogical things.
It is you who have to decide about proceeding with the proposed purchase.
In any case it may take at least another one year and not less than that to get your property even if you pay the demanded 90% amount right away.
So you are the better judge of the situation.
1. Bank releases buyer's loan amount based on "Agreement for Sale" and other related documents. Banks do not release loans without documentarily knowing as to who the buyer is .... which is possible only by looking at registered Agreement to Sale.
2. Avoid getting into such smooth traps.
No it's illegal. You can approach consumer court against him for the necessary direction against builder
1. At the time of ATS not more than 1/5th of the sale consideration should be paid by a prudent buyer. Builder lobby in this country is mostly dishonest. If you pay what he is demanding then he may not honour his contractual obligations at all as he would have already pccketed most of the sale consideration, leaving you to make rounds of the courts for years to recover your money.
2. Possession of the property cannot be delivered unless and until OC has been granted.
3. Sale agreement does not create title in favour of buyer, sale deed alone does.
Don't agree for 90% Payment.
Execute Registered agreement and pay 10 to 30 % payment.
For any under construction property loan, banks never disburse the entire loan amount in one-shot to the borrower rather they give it in various instalments.
No bank will release on the registration of sale deed.
If you will fulfill his demands, you will be at risk only.
1. It is safe to go ahead with purchase of builder is ready to give possession of flat with in next two three months.
2. You can make agreement by payment of 90% advance amount but to negotiate with builder about payment of some amount at time of possession.
. I.have shortlisted a flat for purchase in Bangalore. It's in ready to move in state with occupancy certificate. It's a resale flat. Now since I'm taking a bank loan can I get the sale deed done directly without the sale agreement? Also what of documents do I need to ask for property verfidicatuoj by lawyer.
For sanction of loan bank would insist that agreement for sale be entered into before sale deed is executed
2) insist on no due certificate from society .
3) NOC from society
4) original share certificate and chain of documents of title
5) seek inspection of OC certificate
Yes, agreement to sell is needed to lock term and condition of future sale. When instant sale, no need of ATS.
Every single original document from the origin of property will deliver to you.
1. If you are going for a bank loan then loan will not be sanctioned without an agreement to sale.
2. Seek copies of all documents forming chain of title and all necessary approvals before you pay a penny.
You can get the sale deed registered directly without wasting your time for agreement of sale formalities.
You first obtain whatever relevant papers the vendor is giving to you, produce it before your advocate, he will further instruct procurement or production of more documents related to this property.
A sale agreement is a prerequisite for home loan processing. Only after you enter into a sale agreement and pay 20%, bank will process your loan for the remaining 80% (ratio of loan could vary).Hence you cannot directly go with sale deed in this case.
Documents that are required for a resale flat would be;
a) Sale deed of present owner,
b) Katha certificate & extract for the present flat in the name of present owner, must be latest,
c) Latest tax paid receipt i.e., 2020-21,
d) No due certificate from flat owners association in respect of Maintenance for this flat,
e) Possession letter from builder,
f) Latest electricty bill and receipt for this flat, &
g) All original documents to be produced for verification at Lawyers office with prior intimation.
Get all the above and contact anyone on this forum to get the validation done.
If you do not want to enter into such agreement, you can very well go ahead with sale deed itself directly.
Yes sale.deed can be done directly without the agreement
- Yes, you should ask the builder to execute the Sale deed in your favour without entering into the sale agreement as you are going to purchase a resale Flat .
- You should take CC,OC and possession letter from the builder , and as per the requirement of the bank.
You can do it without sale agreement but you need to manage all the monetary conditions at once after execution of sale deed