Property Sale Agreement Drafting

What is a property sale agreement?

A sale agreement – also called an agreement to sell – is the contract a buyer and seller sign once they agree on a price, before the final sale deed. It records the price, the advance paid, what each side must do and the date by which the sale will be completed. It gives the buyer time to arrange a home loan and finish legal checks, and the seller time to clear dues, collect NOCs and hand over documents.

Sale agreement vs sale deed

If the buyer takes possession before the sale deed, the agreement must be registered for the buyer to rely on the part-performance protection of the Transfer of Property Act. For under-construction flats in RERA-registered projects, the builder cannot take more than 10% of the price as an advance without first signing and registering an agreement for sale. When you are ready to complete, we handle the sale deed registration.

What a sale agreement should cover

• Full description of the property – survey or khata number, area, boundaries, and any parking or common areas
• Total price, the advance (earnest money) paid and the schedule for the balance
• The seller's assurance of clear, marketable title with no mortgages, liens or disputes
• A loan clause – what happens if the buyer's home loan is not sanctioned in time
• Documents the seller must hand over: title deeds, encumbrance certificate, tax receipts, approved plan and NOCs
• Who pays stamp duty, registration charges, society transfer fees and dues up to the sale date
• The date for executing the sale deed and handing over possession
• Default terms – forfeiture of the advance if the buyer backs out, and refund with an agreed penalty if the seller backs out
• Dispute resolution and the courts with jurisdiction

Checks before you pay the advance

• Title – the chain of ownership for at least the last 30 years, with mutation and khata in the seller's name
• Encumbrance certificate – showing no mortgage, lien or earlier sale
• Approvals – sanctioned building plan, occupancy or completion certificate and, for new projects, RERA registration
• Dues – property tax, electricity, water and society dues paid up to date
• Seller's authority – all co-owners must sign; if a power of attorney holder signs, the POA must be verified
• Litigation – no pending cases or court orders affecting the property

A property title verification by our lawyers covers these checks before money changes hands.

Joint owners, NRIs and inherited property

• Joint owners – every co-owner must sign the agreement and the sale deed, or authorise someone through a power of attorney.
• NRI sellers – the buyer must deduct TDS at the rates that apply to non-residents, which are higher than 1%, so plan the payments accordingly.
• Inherited property – the seller should show how they inherited it – for example a will (with probate where required), a legal heir certificate or a partition deed – and the property records should be in their name.

Tax points for buyer and seller

• If the price is ₹50 lakh or more, the buyer must deduct 1% TDS from each payment to the seller and deposit it with the government.
• The seller pays capital gains tax on any profit; reinvesting in another house can reduce it.

After the sale agreement

Once the conditions are met, the sale deed is executed, stamped and registered, and the buyer applies to have the property records changed to their name. If a family member is giving up their share rather than selling, a relinquishment deed or gift deed may be the right document. If someone will sign on your behalf, they need a power of attorney.