Builder-Buyer Agreement Clauses: What to Check Before You Sign
The builder-buyer agreement (the "agreement for sale" in the RERA Act) is the contract that governs an under-construction flat until the conveyance deed. The clauses that matter most are possession date and delay interest, payment schedule, changes to plans, defect liability and cancellation. Under section 13 of the RERA Act, 2016, the builder cannot take more than 10% of the price before this agreement is signed and registered.
Key takeaways
- No more than 10% of the cost can be collected as an advance or application fee before a written, registered agreement for sale (RERA section 13).
- If possession is late, section 18 lets you either withdraw with a full refund plus interest, or stay and take interest for every month of delay.
- The interest rate runs both ways: in most states it is SBI's highest MCLR plus 2%, charged to you if you pay late and paid to you if the builder delivers late.
- Changes to the sanctioned plans or common areas need the written consent of two-thirds of the allottees (section 14).
- The builder must fix structural and workmanship defects reported within five years of possession, free, within 30 days (section 14(3)).
Why this document matters more than the brochure
Until the conveyance deed is registered, the builder-buyer agreement alone defines what you are buying and what happens if either side slips. It is still an agreement, not a transfer of title, which is the distinction we explain in sale deed vs agreement to sell. The brochure counts for little if the agreement says otherwise.
Section 13(2) of the RERA Act requires the agreement to be in the form the appropriate government prescribes; section 84(2)(h) lets it make rules on that form. The Centre circulated a draft to states in 2016, and in February 2022, hearing Ashwini Kumar Upadhyay's petition, the Supreme Court asked the housing ministry to check where state rules depart from it. The state's model form sets the floor. A builder can add terms, but the additions should not dilute the rights the Act and the rules give you. When a clause in your draft looks harsher than the state's model form, ask why.
The 10% rule and the payment schedule
Section 13(1) says a promoter shall not accept more than 10% of the cost of the apartment, plot or building as an advance or application fee without first entering into a written agreement for sale and registering it. Everything you pay up to that point is typically covered by the allotment letter, which we cover in our allotment letter guide.
After signing, check that the schedule is tied to construction milestones you can verify (foundation, each slab, brickwork, finishing, possession) rather than to calendar dates that run regardless of progress. Check too what happens if the builder raises a demand for a milestone that has not been reached.
Worked example: the cap, and the stamp duty
Take a Rs 1.2 crore flat in Mumbai. The most the builder can take before a registered agreement is 10%, or Rs 12,00,000. Anything more, and the builder is in breach of section 13.
In Maharashtra, an agreement for sale that transfers or agrees to transfer possession is treated as a conveyance under Explanation I to Article 25 of the Stamp Act. Stamp duty in Mumbai is 6% including the 1% metro cess (5% for a woman buying in her sole name), and the registration fee is 1% capped at Rs 30,000.
- Male buyer: 6% of Rs 1,20,00,000 is Rs 7,20,000, plus Rs 30,000 registration, a total of Rs 7,50,000 at the agreement stage.
- Woman buying alone: 5% is Rs 6,00,000, plus Rs 30,000, a total of Rs 6,30,000, a saving of Rs 1,20,000.
In Karnataka the picture is different: an agreement without possession attracts 0.5% under Article 5(e)(ii), so the same Rs 1.2 crore price would carry Rs 60,000 on the agreement, with full duty due later on the sale deed.
Possession date, delay and interest
This is the clause buyers fight over most. Look for three things: a specific possession date, a narrow and defined force majeure clause, and no open-ended "grace period" that quietly adds a year or more.
What section 18 gives you
If the builder fails to give possession as per the agreement, section 18(1) gives you a choice. You can withdraw and get a full refund of what you paid, with interest. Or you can stay in the project and receive interest for every month of delay until possession. Our guide to possession delay and refund rights covers how to claim it.
Worked example: delay interest
Most states set the rate at SBI's highest MCLR plus 2%. From 15 September 2026 SBI's MCLR ran from 7.85% to 8.80% across tenures (another listing gives 7.90% to 8.85%), so the rate is about 10.8% a year. MCLR moves, so check the current figure when you claim. Suppose you have paid Rs 80 lakh.
- Annual interest: 10.8% of Rs 80,00,000 is Rs 8,64,000.
- Monthly: Rs 8,64,000 divided by 12 is Rs 72,000 for every month of delay.
- An 18-month delay: Rs 72,000 x 18 = Rs 12,96,000, about Rs 13 lakh.
The same rate applies against you under section 19 if you pay an instalment late. A good agreement states this symmetry openly. A bad one sets a high penalty rate for you and a token per-square-foot compensation for the builder.
Clause-by-clause checklist
| Clause | What the law says | What to look for in your draft |
|---|---|---|
| Advance before agreement | Max 10% of cost (s.13(1)) | No demand above 10% before registration |
| Possession date | Delay triggers refund or monthly interest (s.18) | A fixed date; tight force majeure; no vague grace period |
| Interest on default | Same prescribed rate both ways (s.18, s.19) | One rate for both sides, stated in the clause |
| Plan changes | Two-thirds of allottees must consent (s.14) | No blanket consent to future changes hidden in the text |
| Defect liability | 5 years from possession; fix within 30 days, free (s.14(3)) | Period runs from actual possession, not from OC |
| Cancellation | State model forms typically cap forfeiture at 10% of the price | Forfeiture no higher than the state cap; refund deadline stated |
| Area and price | Price per the agreed area and specifications | Carpet area stated; what happens if final area differs |
Plan changes, specifications and common areas
Section 14 requires the builder to develop the project according to the sanctioned plans and specifications. Any alteration or addition to the sanctioned plans, layout or specifications of the building or common areas needs the prior written consent of at least two-thirds of the allottees, not counting the builder.
Watch for a clause in which you consent in advance to "any changes the promoter may deem fit". Also make sure the specification schedule is detailed: brand or grade of fittings, flooring, lifts, power backup, and the amenities promised in the common areas.
Cancellation and forfeiture
The RERA Act itself has no forfeiture provision, so the limits come from state model agreements and regulators. The model form in several states lets the promoter forfeit 10% of the total consideration if you withdraw without the builder's fault, with the balance refunded within a set period, 45 to 90 days depending on the state. Haryana's authority capped earnest-money forfeiture at 10% of the consideration by a regulation of 5 December 2018. In Maharashtra, the model allotment letter allows only a 1.5% deduction if you cancel between 31 and 60 days after booking, and the MahaRERA appellate tribunal has held that nothing can be forfeited if you withdraw before a sale agreement is signed. Push back on any clause that forfeits more.
Defect liability and handover
Under section 14(3), if you report a structural defect, or any defect in workmanship, quality or provision of services, within five years of the date of handing over possession, the builder must rectify it without further charge within 30 days. The agreement should not shorten this period or make it run from an earlier date such as the occupancy certificate. For what to check at handover, see our possession letter guide.
Where these agreements still go wrong
RERA has improved the baseline, but it has not made every agreement fair, and a few groups should be especially careful.
- Buyers who sign on the day. Ask for the draft in advance and compare it with your state's model form clause by clause.
- Buyers in projects registered late or not at all. Without RERA registration, you lose much of the protection above. Check the project on your state RERA portal first; our RERA explainer shows how.
- Investors planning to flip. Transfer or assignment fees before possession can wipe out a thin margin. Read that clause before you count on a resale.
Frequently asked questions
Is a builder-buyer agreement the same as an agreement for sale?
Yes, in substance. The RERA Act calls it an agreement for sale, and section 13 requires it to be written and registered before the builder takes more than 10% of the cost. It sets out the price, payment plan, possession date and both sides' obligations. Ownership still passes only later, when the conveyance deed is executed and registered after completion.
Can a builder charge more than 10% before registering the agreement?
No. Section 13(1) bars a promoter from accepting more than 10% of the cost as an advance or application fee without first signing and registering an agreement for sale. On a Rs 1.2 crore flat, that is Rs 12 lakh. If you are asked for more, insist on the registered agreement first, or complain to the state RERA authority.
What interest do I get if possession is delayed?
Under section 18, you receive interest for every month of delay if you stay in the project, or a full refund with interest if you withdraw. Most states set the rate at SBI's highest MCLR plus 2%, about 10.8% in September 2026, the same rate you would pay the builder for a late instalment. On Rs 80 lakh paid, that works out to Rs 72,000 a month.
How long is the builder responsible for defects?
Five years from the date possession is handed over. Under section 14(3), any structural defect, or defect in workmanship, quality or services, reported within that period must be rectified free within 30 days. If the builder does not, you can complain to the state RERA authority. Check that your agreement does not start the clock from an earlier date.
If you have a draft agreement in hand and want to know which clauses to push back on, the Realty Hunting team is glad to go through it with you.
