Agreement To Sell Drafting For Residential Property

Here is a practical guide to agreement to sell drafting for a residential property, written for owners, buyers and families in Delhi NCR and elsewhere in India. The firm of Advocate B.K. Singh handles this work from offices in Dwarka, New Delhi and Vaishali, Ghaziabad.

In short. An agreement to sell is a contract in which the seller promises to sell and the buyer to buy a property on agreed terms at a future date. It does not transfer ownership; the sale deed does. A well-drafted agreement fixes the price, earnest money, payment dates, title documents, approvals, possession, stamp duty and what happens if either side defaults.

An agreement to sell, often called a bayana agreement in Delhi NCR, is the contract signed between a seller and a buyer after they agree on price but before the sale deed is registered. Under section 54 of the Transfer of Property Act 1882, a contract for sale does not by itself create any interest in or charge on the property. Ownership passes only when the registered sale deed is executed. What the agreement does is bind both sides to complete the sale on fixed terms and give each of them legal remedies if the other backs out.

Most property disputes that end up in court over a failed deal start with a badly drafted agreement: a vague payment schedule, no deadline, no list of documents, no clarity about who pays for approvals, or an earnest money clause that cannot be enforced. A good agreement prevents these fights or at least makes the outcome predictable. This page explains what an agreement to sell should contain, how stamp duty and registration work, what changes for different property types and parties, and what to do before you sign.

Law

Transfer of Property Act 1882 (sections 53A and 54); Indian Contract Act 1872 (sections 55, 73 and 74); Specific Relief Act 1963 (sections 10, 14, 16 and 20); Registration Act 1908 (sections 17(1A) and 49); state stamp laws

Effect

Creates a binding contract to sell; does not transfer ownership or create any interest in the property

Stamp duty

Depends on the state and on whether possession is handed over; with possession, Delhi, UP and Haryana generally charge duty as on a conveyance

Registration

Optional for a simple agreement, but needed for protection of possession under section 53A and required by RERA for agreements with promoters

Time limit to enforce

A suit for specific performance must be filed within 3 years from the date fixed for performance, or from the date the buyer learns of refusal (Article 54, Limitation Act)

Documents

Seller's title deed and chain, identity and PAN of both parties, encumbrance and tax records, approvals and NOCs, loan papers if the property is mortgaged

What an agreement to sell is, and what it is not

An agreement to sell is a promise about a future sale. The seller agrees to transfer the property to the buyer for a fixed price on or before a fixed date, and the buyer agrees to pay. Until the sale deed is registered, the seller remains the owner. If the seller dies, the obligation passes to his heirs; if he sells to someone else, the buyer's remedy is a suit for specific performance, and a later purchaser with notice of the agreement takes the property subject to it.

An agreement to sell is not a sale deed, and it does not become one because of its wording, the amount paid or the length of time the buyer has been in possession. The Supreme Court made this clear in Suraj Lamp and Industries v State of Haryana (2011): transfers through an agreement to sell, a general power of attorney and a will, the old GPA sale route common in Delhi, do not convey title. A buyer who has paid in full but holds only an agreement still has to get a registered sale deed to become owner.

That limitation shapes how the agreement should be drafted. It should be a clear bridge to the sale deed: what each side must do, by when, and what happens if they do not. It should not try to act as a substitute for the sale deed, because it cannot.

When you need an agreement to sell and when you can go straight to the sale deed

An agreement to sell is useful whenever there is a gap between agreeing on price and registering the sale. The gap usually exists because the buyer needs time to arrange a loan, the seller needs time to clear an existing mortgage, an authority's permission or NOC is needed, the title has to be checked, or the property is being vacated. The agreement locks in the price and the terms during that gap.

If the title is clean, the buyer has the money, no permission is needed and both sides are ready, many buyers go straight to the sale deed. That saves one round of stamp duty and avoids the risk of a dispute during the gap. Where a token amount is paid before the agreement, a short receipt describing the property, the price and the date for signing the agreement is better than nothing, but a token receipt without terms is a common source of litigation over refunds. See our page on a legal notice for refund of token money for what happens when such deals fall through.

In builder sales, the position is different. Under section 13 of the RERA Act 2016, a promoter cannot take more than 10 per cent of the cost of an apartment, plot or building as an advance or application fee without first executing and registering a written agreement for sale in the form prescribed by the state rules. Buyers from a promoter should therefore expect a registered agreement before paying more than that.

The law that governs an agreement to sell

Stamp duty and registration of the agreement

Stamp duty on an agreement to sell depends on the state and on whether possession is handed over. In Delhi, Uttar Pradesh and Haryana, an agreement to sell under which possession is delivered, or agreed to be delivered without executing a conveyance, is generally charged with duty as if it were a conveyance on the market value. Where no possession is given, a much lower duty usually applies under the agreement article of the state schedule, though the rate and method differ by state. Check the current schedule before printing the e-stamp, and see our stamp duty advisory page for how the figure is worked out.

Where full conveyance duty has been paid on an agreement with possession, state laws usually allow that duty to be adjusted against the duty on the later sale deed, subject to conditions. Keep the original agreement and e-stamp certificate, because the Sub-Registrar will ask for them when the sale deed is presented.

Registration of a simple agreement to sell without possession is generally optional. It becomes important in three situations: when the buyer takes possession and wants section 53A protection, when the agreement is with a promoter under RERA, and when the buyer wants a public record that warns later purchasers. An unregistered and understamped agreement can still create problems: under the Stamp Act it cannot be admitted in evidence until the deficient duty and penalty are paid.

The clauses every agreement to sell needs

Price, earnest money and the payment schedule

The price clause should state the total consideration, the earnest money paid at signing, each later instalment with its date, and the balance payable at registration. Payment by bank transfer or cheque, with the details recorded in the agreement and later in the sale deed, is the safest route. Large cash payments create tax problems for both sides and are hard to prove in court.

Earnest money is a deposit that guarantees performance. If the buyer defaults, a reasonable earnest amount can usually be forfeited if the agreement says so. Courts do not allow a seller to forfeit large part payments simply by calling them earnest money; anything beyond a reasonable deposit is treated as a payment towards price, and forfeiture of it depends on the seller showing loss, under sections 73 and 74 of the Contract Act. Draft the earnest money clause with a figure that is defensible and say clearly what happens to the other payments on default.

Where the price is ₹50 lakh or more and the seller is a resident, the buyer must deduct tax at source at the rate fixed by income-tax law and deposit it. For an NRI seller, the TDS rate is higher and is calculated on the capital gain or the price as the law requires, and the buyer needs a TAN. The Income-tax Act 2025 has replaced the 1961 Act from April 2026, so check the current provision and rate. The agreement should say that the TDS amount forms part of the price and the buyer will give the seller the TDS certificate.

The price should also be compared with the circle rate or the authority's guideline value. If the agreed price is below the circle rate, stamp duty will still be charged on the circle rate, and income-tax rules may treat the difference as income in the hands of the buyer or as deemed consideration for the seller. Our circle rate advisory page explains the effect.

Title, encumbrance and approval clauses

The seller should warrant that he is the absolute owner with clear and marketable title, that the property is free from all encumbrances, charges, liens, attachments, acquisition notices and litigation, that it has not been agreed to be sold to anyone else, and that all taxes and dues have been paid. The warranties should be backed by an indemnity: if any of them prove false, the seller compensates the buyer. A list of the title documents, with registration numbers and dates, should be annexed.

The agreement should give the buyer a fixed period to verify title and should say what happens if title is found defective: the buyer can withdraw and get a full refund, or the seller must cure the defect by a date. That period is when the buyer should get a title verification and an encumbrance check done, together with a search of court cases and authority records.

If the property is mortgaged to a bank, the agreement should say exactly how the loan will be closed: the buyer may pay part of the price directly to the bank against a written foreclosure letter, the bank issues a no dues certificate and returns the original title deeds, and only then is the sale deed registered. If the property is leasehold or in a society, the agreement should say who will obtain the authority's sale permission or transfer approval, the society's NOC and any conversion, and who pays transfer charges or unearned increase. When Advocate B.K. Singh drafts an agreement for a leasehold or mortgaged property, the clause he spends most time on is the one that ties each payment to a document in hand, because that is the clause that protects the buyer if the deal stalls.

Deadlines, default and remedies

In contracts for immovable property, courts usually presume that time is not of the essence unless the agreement clearly says so and the conduct of the parties is consistent with it. If the deadline matters, say that time is of the essence, give a final date, and set out what happens if either side misses it. Build in a short grace period with notice, because rigid clauses invite arguments that they were waived.

For buyer default, the usual remedy is forfeiture of the earnest money and cancellation after a written notice giving a short time to pay. For seller default, the usual remedies are refund of all amounts with interest or a stated sum by way of compensation, or a suit for specific performance. Since 2018, specific performance is the normal remedy for a buyer who has been ready and willing throughout, but the buyer must be able to prove it, for example by showing the balance funds or a sanctioned loan. A specific performance suit must be filed within 3 years from the date fixed for performance or, if no date was fixed, from when the buyer learned of the refusal.

Cancellation should be done properly. A party that wants to end the agreement should send a written notice under the terms of the contract and, where a registered agreement exists, consider whether a registered cancellation deed or a suit is needed. See our page on cancellation of agreement to sell for how that is done and what happens to the money.

How we draft an agreement to sell

Most of the work happens before a single clause is written.

1. Take instructions from both sides' terms

   Record the price, payment plan, earnest money, dates, what is included (parking, fittings, furniture) and who pays which costs. Find out whether possession will be given before the sale deed, because that changes stamp duty.

2. Read the title papers

   Go through the seller's title deed, chain, mutation, tax receipts, loan papers and approvals. Identify what is missing, such as a society NOC, a conversion deed or a bank's foreclosure letter.

3. Identify permissions and restrictions

   Check whether an authority's permission is needed, whether the land is agricultural or leasehold, whether the seller is an NRI, a minor, a company or a co-owner, and whether any law restricts the transfer.

4. Draft the agreement

   Write the clauses in plain language, with each payment linked to a document or event, clear warranties, a title check period, default remedies and a dispute clause. Annex the list of documents and a site plan where useful.

5. Settle stamp duty and execution

   Work out the stamp duty for the state and buy the e-stamp certificate in the right name. Arrange signatures of all owners and two witnesses, and registration if needed.

6. Track performance

   Diarise the dates for approvals, payments and registration. Keep copies of all payments and correspondence, because they are the evidence of readiness and willingness if a dispute arises.

When the conditions are met, the same file becomes the basis of the sale deed. See our sale deed drafting page for the next stage.

Documents needed to draft an agreement to sell

How the agreement changes by property type

For a flat in a group housing society, the agreement must deal with the society's NOC and membership transfer, the share certificate, maintenance dues and parking allotment. In Delhi cooperative group housing societies, transfer of membership follows the Delhi Cooperative Societies Act 2003 and the society's bye-laws, and the flat may still be leasehold. For a flat bought from a builder after possession, the conveyance deed and the occupation certificate should be in hand.

For a leasehold plot allotted by DDA, Noida, Greater Noida or GDA, the agreement must say who will apply for the authority's transfer permission, who pays transfer charges, and whether the property will first be converted to freehold where that is allowed. For an industrial plot or factory on authority land, transfer usually needs the authority's prior approval and sometimes a change in the permitted activity, and the agreement should be conditional on that approval. Existing machinery, pollution consents and electricity load are usually dealt with in a separate schedule.

For agricultural land, check the restrictions in the state revenue law before drafting. In Delhi, the Delhi Land Reforms Act 1954 restricts certain transfers of agricultural holdings, and in UP the Revenue Code 2006 restricts transfers by Scheduled Caste bhumidhars without the Collector's permission. NRIs cannot buy agricultural land, plantation property or farmhouses under FEMA rules. For lal dora and abadi property in Delhi villages, where registered title often does not exist, the agreement should record the basis of the seller's possession and the documents available, and the buyer should understand the limits of that title.

For commercial and retail property with an existing tenant, decide whether the buyer takes the property subject to the tenancy, with the lease and security deposit transferred, or whether the seller must hand over vacant possession. For a villa or farmhouse, check land use, building approvals and whether any part is on land that is not covered by the title.

How the agreement changes by the parties involved

NRI sellers and buyers. An NRI or OCI can buy residential and commercial property in India, but not agricultural land, plantation property or a farmhouse. Payments must come through normal banking channels, usually from an NRE or NRO account. An NRI seller often signs through a power of attorney holder in India, and the power of attorney should specifically authorise signing the agreement and sale deed and receiving money, and should be attested and, if executed abroad, adjudicated for stamp duty in India within the time the state law allows.

Companies, LLPs and startups. The agreement should be signed by an authorised signatory under a board or partner resolution, and the resolution should be annexed. A company buying property also needs to check that its constitution allows it. Builders selling under RERA must use the form of agreement prescribed by the state rules and register it before taking more than 10 per cent of the price. Cooperative societies selling or transferring property need a resolution of the general body or managing committee, as the bye-laws require.

Co-owners and heirs. All co-owners must sign. Where one heir signs for others, he needs their written authority. If a minor has a share, the natural guardian needs the permission of the court under section 8 of the Hindu Minority and Guardianship Act 1956 before selling it, and an agreement signed without that permission can be avoided. Bank-financed buyers need an agreement that gives enough time for loan disbursement and allows payment directly to the seller or the seller's bank.

Jurisdiction, arbitration and dispute clauses

A suit for specific performance or possession of immovable property must generally be filed where the property is located, under section 16 of the CPC. A clause naming the courts of another city does not change that for suits about the property itself, though it may matter for a pure money claim. Name the courts where the property is, to avoid an argument.

Disputes under an agreement to sell, including claims for specific performance, are generally arbitrable because they concern rights between the parties rather than rights against the world. An arbitration clause can therefore be included. It suits commercial buyers who want a private forum; for individual buyers, the cost of arbitration can be higher than a civil suit, so think before choosing it. Many agreements now include a step of mediation before either side goes to court or arbitration.

Keep the dispute clause simple and consistent with the rest of the agreement. Conflicting clauses, such as an arbitration clause and an exclusive court clause in the same document, give the other side room to delay.

Common drafting mistakes in agreements to sell

• No final date. Without a date, the limitation period for specific performance runs from the date of refusal, which is often disputed. Always fix a date.
• Payments not tied to documents. Paying the bulk of the price before the bank releases the title deeds or the authority grants permission leaves the buyer exposed.
• Unrealistic earnest money. A forfeiture clause covering half the price will not be enforced as written. Keep the earnest figure reasonable.
• Possession given without the right stamp. If possession is handed over, the agreement may attract conveyance duty. Understamping leads to penalties and evidentiary problems.
• Missing co-owners. An agreement signed by one co-owner binds only his share and invites litigation from the others.
• Copying old formats. Formats from before 2018 often misstate the law on specific performance, refer to repealed provisions or ignore RERA. Draft for the current law.

Before you sign an agreement to sell this week

• Get the seller's title deed and full chain and have them checked
• Find out whether the property is mortgaged and how the loan will be cleared
• Check whether an authority's permission, society NOC or conversion is needed
• Fix a reasonable earnest amount and link each payment to a document or event
• Decide whether possession will be given before the sale deed and check the stamp duty
• Make sure all co-owners and authorised signatories sign
• Fix a final date and say what happens on default
• Pay by bank transfer and keep every receipt

Related checks and the next step

An agreement to sell works best when it sits inside a proper transaction plan. Before signing, a chain of title check confirms that the seller can sell. If the other side has sent you a draft, our page on agreement to sell review explains what to look for. After the sale deed, the next steps are registration and mutation in the records of the authority or revenue office.

If you want the papers checked before you sign, the team of Advocate B.K. Singh at Legals365 can review them and tell you the next step through our talk to a lawyer page.

Residential property: what changes

Residential property covers houses, builder floors, flats in group housing societies and apartments in developer projects. It is the property people care about most, and the law gives it more protection than commercial premises: consumer remedies against builders, rent control for old tenancies, special rules for senior citizens and family members. It also carries more family disputes than any other kind of asset.

The documents depend on the type. For an independent house or builder floor in Delhi, ask for the chain of sale deeds or the conveyance deed from DDA, the sanctioned building plan, the completion certificate, mutation in MCD records, the latest property tax receipt and electricity and water bills. For a flat in a cooperative group housing society, ownership runs through membership: the share certificate, the society's NOC and the Registrar of Cooperative Societies' approval of the transfer matter as much as the deed. For a flat in a developer project in Noida, Greater Noida or Gurugram, check the RERA registration, the builder-buyer agreement, the occupancy certificate, the tripartite sub-lease or conveyance deed, and whether the builder has paid the land dues to the authority, since unpaid dues have held up registration for thousands of buyers.

Stamp duty is charged on the higher of the price and the circle rate. Delhi charges women buyers a lower rate, and joint purchases fall in between; Uttar Pradesh and Haryana have their own concessions. Registration is at the sub-registrar office for the area, with both parties and two witnesses present. After registration, mutation in the municipal or authority record should be applied for, since it governs property tax and later dealings, even though mutation is not proof of title.

Disputes tend to fall into a few groups. Against builders: delayed possession, reduced area, poor construction and missing amenities, which go to the RERA authority or the consumer commission at the buyer's choice. Between landlord and tenant: old tenancies with rent up to ₹3,500 a month in Delhi are governed by the Delhi Rent Control Act 1958, where eviction for the landlord's bona fide need under section 14(1)(e) is the usual route; newer tenancies are contractual and go to the civil court or the rent authority under any new tenancy law the state has adopted. Within families: partition, wills and succession, and disputes over who may live in the house. Senior citizens can approach the Maintenance Tribunal under the Maintenance and Welfare of Parents and Senior Citizens Act 2007, which in appropriate cases has ordered children to vacate a parent's house. A wife's right to reside in the shared household under the Domestic Violence Act 2005 can also affect who stays in a property.

A few habits prevent most problems. Never buy on a GPA and agreement to sell alone. Insist on the occupancy or completion certificate. Keep original documents safe and certified copies handy. And put family arrangements about a house in writing, ideally a registered partition or family settlement, before a death or a marriage breakdown turns them into litigation.

Frequently asked questions

Is an agreement to sell the same as a sale deed?

No. An agreement to sell is a promise to sell in future and does not transfer ownership or create any interest in the property. Ownership passes only through a registered sale deed under section 54 of the Transfer of Property Act.

Is registration of an agreement to sell compulsory?

Not for a simple agreement without possession, in most cases. Registration is needed if the buyer takes possession and wants protection under section 53A, and RERA requires registered agreements for sale with promoters. Registration also gives notice to later buyers.

What is the stamp duty on an agreement to sell in Delhi?

If possession is given or agreed to be given without a conveyance, it is generally charged as a conveyance on market value. Without possession, a lower duty applies under the agreement article. Check the current Delhi schedule before buying the e-stamp.

How much earnest money should be paid?

There is no fixed legal figure, but it should be a reasonable deposit. Courts allow forfeiture of reasonable earnest money if the contract says so, but not of large payments towards price without proof of loss.

Can the seller cancel the agreement and return the money?

Not unilaterally if the buyer is ready and willing to perform. Since 2018, specific performance is the normal remedy for such a buyer. The seller can cancel only where the agreement or the law allows, usually after the buyer defaults and a notice is given.

What is the time limit to enforce an agreement to sell?

A suit for specific performance must be filed within 3 years from the date fixed for performance or, if no date was fixed, from when the buyer had notice of refusal. Waiting longer usually loses the remedy.

Can an NRI sign an agreement to sell through a power of attorney?

Yes. The power of attorney should expressly authorise signing the agreement and sale deed and receiving payments. If it is executed abroad, it must be attested properly and stamped in India within the time the state law allows.

Do all co-owners need to sign the agreement to sell?

Yes. An agreement signed by one co-owner binds only that person's share. The buyer cannot get full title unless all co-owners agree or one holds valid authority from the others.

Can I take possession under an agreement to sell?

You can, but stamp duty may then be charged as on a conveyance, and section 53A protection is available only if the agreement is registered. Possession does not make you owner until the sale deed is registered.

Should an agreement to sell have an arbitration clause?

It can, because disputes under an agreement to sell are generally arbitrable. For individual buyers a civil suit may cost less, so the choice depends on the parties. The clause should not conflict with any court clause.

Is TDS deducted on payments under an agreement to sell?

Yes, where the price is at or above the threshold in income-tax law, TDS must be deducted on each payment, including earnest money. For NRI sellers the rate and method differ. Check the current provision after the Income-tax Act 2025 took effect.

What if the property has a bank loan?

The agreement should say how the loan will be closed, usually by paying part of the price directly to the bank against a foreclosure letter. The sale deed should be registered only after the bank issues a no dues certificate and returns the original documents.

Should I go to RERA or the consumer commission against my builder?

You can choose either, as the Supreme Court held in Newtech Promoters v State of UP (2021), but not both for the same relief. RERA is often quicker for refund or delay interest under section 18; the consumer commission can also award compensation for deficiency in service. The choice depends on the amount, the relief you want and how far the project has progressed.

Can my son be evicted from my house if he harasses me?

In many cases, yes. The Maintenance Tribunal under the Senior Citizens Act 2007 has power to protect a parent's property and life, and courts have upheld eviction orders against children in suitable cases. The parent's ownership of the house and evidence of ill-treatment are the key facts.