Builder-Buyer Agreement: The 20 Clauses Every Developer Must Include

The builder-buyer agreement, or the agreement for sale, is the most litigated document in Indian real estate. It is the hinge between marketing promises and RERA obligations, between booking-stage enthusiasm and possession-stage disputes. Under Section 13 of the Real Estate (Regulation and Development) Act, 2016, no promoter may accept more than ten percent of the cost of an apartment without first entering into a registered written agreement for sale. Under the Transfer of Property Act, 1882 and the Registration Act, 1908, that agreement is also the document that creates binding obligations well before the sale deed is executed.

A strong developer-side agreement for sale accomplishes two things. It complies with the Model Agreement for Sale prescribed by the relevant state RERA rules, and it preserves the developer's legitimate commercial flexibility without creating grounds for later regulatory findings of "one-sided" or "contrary to the Act." This guide walks through the twenty clauses that every Indian builder-buyer agreement should contain, written for developer principals who must sign off on the document, not for the paralegal drafting it.

1. Parties, Capacity and Recitals

The agreement must identify the promoter (with full corporate description, CIN, registered office, PAN, and RERA registration), the allottee (with full name, PAN, permanent address and Aadhaar references where permissible) and any confirming parties such as landowners in a JDA structure. Recitals should record the chain of title, municipal sanction references, the RERA registration number and a brief commercial background.

These are not boilerplate. A misdescribed promoter, or an unacknowledged confirming party, is a recurring defect that returns during conveyance.

2. The Apartment and Carpet Area

Section 2(k) of the RERA Act defines carpet area as "the net usable floor area of an apartment, excluding the area covered by the external walls, areas under services shafts, exclusive balcony or verandah area and exclusive open terrace area, but includes the area covered by the internal partition walls of the apartment."

The clause must specify:

• Tower, floor, apartment number.
• Carpet area in square metres and square feet (cross-reference the state RERA's approved definition).
• Balcony, terrace and service area if any, declared separately.
• Reference to the sanctioned plan annexed to the agreement.

Avoid using "super built-up" or "saleable area" as the governing area. These remain useful for pricing but cannot be the sole area measure.

3. Consideration and Payment Schedule

The agreement must state the total consideration, the break-up between land cost and construction cost, the GST applicability, and the payment schedule linked to construction milestones. A construction-linked payment plan (CLP) is the RERA-preferred structure. Upfront collection beyond ten percent before agreement execution is a Section 13 breach.

Every payment line should be tied to a verifiable construction milestone — plinth, slab, finishing, OC. Vague milestones such as "structure completion" invite disputes.

4. Interest on Default — Both Sides

Most state Model Agreements require that the rate of interest payable by the allottee on default of payment equals the rate of interest payable by the promoter on default of possession. The prescribed rate is SBI's highest MCLR plus two percent. Asymmetrical interest (18% from the allottee, 8% from the developer) is routinely struck down as contrary to Section 18 read with the Model Agreement.

5. Possession Date and Grace Period

The clause must specify a precise possession date ("on or before 31 December 2027"), not a vague commitment. A grace period of three to six months is commonly permitted in state rules if clearly disclosed in the agreement. Extensions beyond the grace period trigger Section 18 obligations — refund with interest if the allottee withdraws, or monthly interest if the allottee continues.

6. Force Majeure — Narrow and Specific

Section 6 of the Act contemplates extension of the registration period if project completion is delayed due to force majeure — war, flood, drought, fire, cyclone, earthquake or any other calamity caused by nature. The agreement's force majeure clause should mirror this narrow construction. Pandemic-related force majeure, where applicable, must be tied to specific government orders and documented.

A broad force majeure clause that includes "any other event beyond the control of the promoter" is not invalid, but RERA authorities read it narrowly, and general market slowdowns or promoter-side financing disputes are never accepted as excuses.

7. Plan and Specification Changes — Section 14

Under Section 14, no alteration to sanctioned plans, layout or common areas is permissible without the prior written consent of two-thirds of allottees (for common-area changes) or the specific allottee (for apartment-specific changes). The agreement clause must:

• Incorporate this consent mechanism.
• Reference the sanctioned plan annexed.
• Clarify the process for seeking consent, and that any change without consent is a breach.

8. Specifications Annexure

Specifications for flooring, doors, windows, electrical fixtures, plumbing fixtures, kitchen counter, sanitary ware and amenities must be annexed in a specifications schedule. This is the schedule that most post-possession disputes arise from. Every item should be tied to a specific brand category ("premium ceramic tiles, Kajaria or equivalent"), not a vague adjective.

9. Common Areas, Facilities and Amenities

The agreement must identify:

• Common areas attached to the apartment (undivided share).
• Common amenities (clubhouse, pool, gym) and their dimensions.
• Any exclusive-use areas (parking, terrace).
• The mechanism for conveyance to the allottee association under Section 17.

Under-described common amenities are a common Section 12 (misleading advertising) trigger if the marketing material promised features not captured in the agreement.

Review Your Agreement for RERA Compliance

10. Parking

Under Section 2(n) read with MahaRERA and HRERA jurisprudence, open parking cannot be sold separately to allottees; it must be treated as part of the common area. Stilt or covered parking can be allotted for exclusive use subject to state-specific rules. The parking clause must reflect this distinction precisely.

11. Title and Conveyance

The clause should record that the promoter has marketable title, reference the title deed and encumbrance certificate, and commit to execute a registered conveyance deed within three months of receipt of the OC, per Section 17. The undivided share in common areas must pass through the conveyance deed to the association or cooperative society.

12. Mortgage and Charge Over the Apartment

If the project is financed by a bank, the agreement must disclose the existence of the mortgage or charge and the mechanism for release. Section 11(4)(h) requires the promoter not to mortgage the apartment after executing the agreement for sale unless the allottee consents. In practice, the clause should commit the promoter to obtain an NOC from the project lender at the time of registration of the sale deed.

13. Structural Defect Liability — Section 14(3)

Section 14(3) imposes a five-year liability for structural defects, workmanship, quality or services, and requires rectification within thirty days of notice, failing which the allottee is entitled to compensation. The agreement clause should:

• Acknowledge the five-year liability.
• Define a reasonable notice and inspection protocol.
• Specify the scope (what is a structural defect, what is normal wear).
• Preserve the allottee's statutory entitlement — any clause that shortens the five-year period is void.

14. Association of Allottees and Maintenance

The agreement should record:

• The promoter's commitment to facilitate formation of the association, society or cooperative within the statutory timeline.
• The handover of common areas and facilities to the association.
• The maintenance regime during the interim period (typically twelve to eighteen months post-OC).
• Maintenance deposit, if any, and the mechanism for transfer to the association.

15. Representations and Warranties

The agreement should include promoter representations on:

• Good title to the land.
• Compliance with all sanctions and approvals.
• Completion of environmental clearances where applicable.
• Compliance with RERA registration and disclosures.
• No pending litigation that would affect the project.

Allottee representations — KYC compliance, source of funds, no adverse criminal record — are increasingly standard.

16. Assignment and Substitution

Allottee assignment of the agreement to a third party is usually permitted subject to promoter consent, KYC of the assignee, and payment of a reasonable administrative charge. The clause should avoid disproportionate transfer fees, which RERA authorities have struck down as one-sided.

Promoter substitution — assignment of the promoter's obligations to a new entity — must be subject to allottee consent or RERA approval under Section 15.

17. Events of Default and Termination

The clause should distinguish:

• Allottee default (non-payment, refusal to take possession).
• Promoter default (failure to deliver possession, failure to complete).
• Mutual cancellation (subject to Section 18 refund).

Forfeiture of booking amount on allottee cancellation is a sensitive area. RERA authorities have capped forfeiture at reasonable figures (generally not exceeding ten percent of the apartment cost), and contractual forfeiture of larger amounts is routinely set aside.

18. Dispute Resolution and Jurisdiction

The agreement should specify:

• RERA complaints before the state authority under Section 31.
• Appellate route before the state Appellate Tribunal under Section 43.
• Arbitration under the Arbitration and Conciliation Act, 1996 for matters outside RERA jurisdiction.
• Civil court jurisdiction only where necessary, and only in the state where the project is located.

An arbitration clause does not displace RERA jurisdiction for matters within the Act's ambit — the Supreme Court has confirmed that RERA is a special statute and an allottee can pursue remedies before RERA notwithstanding an arbitration clause.

19. Notices, Electronic Delivery and Communications

The clause should capture:

• Mode of delivery (registered post, courier, email).
• Addresses for service, with an obligation to notify changes.
• Electronic delivery validity, backed by the Information Technology Act, 2000.

A clean notice clause is the foundation for enforcing the payment schedule and for serving Section 18 refund claims.

20. Governing Law, Severability and Execution

The agreement should state:

• Governing law: the laws of India, as modified by the law of the state where the project is situated for real estate and stamp matters.
• Severability: any unenforceable clause is severable without affecting the rest.
• Execution: executed in duplicate, stamped, and registered per the Registration Act, 1908 as applicable in the state.

The stamp duty and registration fees on the agreement for sale are typically to the allottee's account. The state Stamp Act dictates the duty; the Registration Act and state-level registration rules dictate the procedure.

21. Post-Execution Operational Checklist (Bonus Clause)

Every agreement should travel with a post-execution checklist confirming:

• Stamp duty paid and challan reference.
• Registration completed and sub-registrar document number captured.
• Copy of registered agreement uploaded to RERA portal.
• Receipt of payments by the allottee against the agreement recorded in the project account.
• Allottee KYC file completed.

A Clause-by-Clause Map

| # | Clause | Statutory Anchor | |---|---|---| | 1 | Parties and Recitals | Indian Contract Act, 1872 | | 2 | Apartment and Carpet Area | RERA Section 2(k) | | 3 | Consideration and Payment | RERA Section 13 | | 4 | Default Interest Both Sides | RERA Section 18 | | 5 | Possession Date and Grace | RERA Section 18 | | 6 | Force Majeure | RERA Section 6 | | 7 | Plan Changes | RERA Section 14 | | 8 | Specifications | Model Agreement | | 9 | Common Areas | RERA Section 2(n) | | 10 | Parking | RERA + state jurisprudence | | 11 | Title and Conveyance | RERA Section 17 | | 12 | Mortgage Disclosure | RERA Section 11(4)(h) | | 13 | Structural Defects | RERA Section 14(3) | | 14 | Association and Maintenance | RERA Section 17 | | 15 | Representations | Contract Act | | 16 | Assignment | RERA + state rules | | 17 | Default and Termination | Contract Act + RERA | | 18 | Dispute Resolution | RERA + Arbitration Act | | 19 | Notices | IT Act, 2000 | | 20 | Governing Law | State-specific |

Generate a RERA-Compliant Agreement

Frequently Asked Questions

Can the developer collect stamp duty and registration fees from the allottee upfront at booking?▾

No. Under Section 13 of the RERA Act, upfront collection is capped at ten percent of the apartment cost until a registered agreement is executed. Stamp duty and registration fees are payable at the time of execution of the agreement, and in practice are paid by the allottee at that stage. Collecting stamp duty and registration fees at booking — before execution of the agreement — creates both a Section 13 breach and a stamp-law timing problem because the duty is payable on execution.

Is a non-RERA-compliant booking form enforceable if the full agreement is executed later?▾

A booking form or application form that is executed before the formal agreement is generally treated as a preliminary document. It is enforceable between the parties to the extent it does not contradict the RERA Act. However, any clause in the booking form that attempts to waive rights under the Act — for example, waiver of Section 18 interest, or extended forfeiture — is void. The correct pattern is to execute the RERA-model agreement for sale promptly after booking, collect no more than ten percent upfront, and ensure the subsequent agreement supersedes the booking form.

Can the developer cap its liability for delayed possession below the Section 18 interest rate?▾

No. Section 18 interest is statutorily fixed at the rate prescribed by the relevant state rules, generally SBI's highest MCLR plus two percent. A contractual clause that attempts to cap developer liability at, say, ten rupees per square foot per month, or at a lower interest rate, is void as contrary to the Act. RERA authorities across states have consistently struck down such clauses and awarded full Section 18 interest irrespective of the contractual cap.

How should the agreement handle pre-EMI interest obligations of the allottee?▾

Pre-EMI arrangements are between the allottee and its lender bank and should be addressed in the tripartite agreement among the developer, the allottee and the bank, not in the builder-buyer agreement. However, the builder-buyer agreement should acknowledge that the allottee may avail a home loan, commit to provide NOCs in reasonable time, and record the process for direct disbursement from the bank to the developer against the construction-linked payment plan.

What happens if the allottee cancels the booking after executing the agreement?▾

Cancellation by the allottee is subject to the termination clause in the agreement and to the general principles in RERA jurisprudence. Developers are typically permitted to retain a reasonable forfeiture (ten percent of apartment cost has emerged as a benchmark), plus any GST or other statutory levies already paid. Retention beyond that figure is routinely struck down as unconscionable. The balance must be refunded to the allottee, generally within 45 to 90 days. Any retention clause must be clearly disclosed in the agreement.

Do we need to register the agreement for sale or only the final sale deed?▾

Both. Under the Registration Act, 1908 as amended in most states (including Maharashtra, Karnataka and Haryana), agreements for sale of immovable property must be registered. Section 13 of RERA reinforces this by requiring a registered agreement. The final sale deed is also registered at the time of execution. Stamp duty paid on the agreement for sale is generally eligible for set-off against the stamp duty payable on the sale deed, subject to state-specific rules.

Can we include a clause that the allottee waives the right to file RERA complaints?▾

No. The Supreme Court and RERA tribunals have uniformly held that RERA rights cannot be contractually waived. A clause that purports to oust RERA jurisdiction, or that requires arbitration for matters within RERA's exclusive jurisdiction, is void. The agreement can include an arbitration clause for disputes outside RERA's ambit, but must expressly preserve the allottee's statutory rights under the RERA Act.