Every business, especially the real estate market, requires strong legal documentation to execute the deal and make it better and more effective. You should be aware of many things when you are buying a house. With the rapid growth of the real estate sector, legal documents play a very important role in the same sector.
The agreement between the builder and buyer, known as the builder-buyer agreement, is the most important document for home buyers. This buyer agreement safeguards your rights and contains all the necessary terms and conditions that both the builders and buyers have to meet from their ends. It also allows you to stand before a court of law if your rights get violated.
A builder-buyer agreement act as an agreement for sale between the builder and buyer which certifies that the concerned property is transferred in the name of the new owner and that the transfer is subject to mutually acceptable terms and conditions. The document holds clauses, peculiarities, annexures, and terms and conditions that the buyer agreed upon in the flat purchase agreement with the builder.
Before signing the document, the buyer should carefully read it as it protects the legal rights of the buyer. This agreement governs the entire sale of property and is drafted and executed at the time of the sale of an under-construction property.
RERA has brought a major change in the Indian real estate sector. Before the RERA Act, the interest of the homebuyers was not well protected. The agreement was inclined towards the real estate builders and developers. According to the pre-RERA builder-buyer agreement, an interest of up to 20 percent was levied on the homebuyer if they defaulted on the payment and the penal rate was as low as 2 percent if the builder or developers defaulted.
The pre-RERA builder buyer agreement included a provision for a price rise. The builder used to raise the prices of the residential properties as and when they desired. When the project was being delayed, they raised the prices, mentioning a rise in the cost of construction materials.
In the pre-RERA regime, the agreement mentioned that the property possession would start from 36-42 months right from the date of start of construction. It wasn’t mentioned that the period started from the date of the flat booking. However, the starting date of construction and construction time depended on the builder’s discretion.
The pre-RERA agreement draft also allowed for the change in the property area and charged the homebuyers. The homebuyers had to pay up to 15 percent more than the original price even if the super area increased. Despite having minimal benefits out of the increased area, this cost was borne by the homebuyers.
The transfer charges weren’t mentioned in the pre-RERA builder buyer agreement. Transfer charges were relevant when the owner sold the property to someone without taking its possession. As no charges were mentioned, the builders used to charge excessive transfer fees.
In the previous agreement, the builders habitually charged excessive prices for additional services. The homebuyers were asked to pay extra for services such as maintenance, security, clubhouse, gym, swimming pool and many more services. Moreover, there was no mention of the Preferential Location Charges in the agreement, but they were charged at the last moment.
The grievances of the homebuyers were addressed with the introduction and formation of the Real Estate Regulatory Authority (RERA) Act. The builder-buyer agreement was drafted and executed by real estate law because the previous agreement favored builders and was a key pain point for the buyers. In accordance with the RERA Act, the builder-buyer agreement, referred to as an agreement for sale in the Real Estate Regulation and Development Act, 2016, is an agreement agreed upon between the promoter and the allottee.
Here are some key provisions after RERA.
The Real Estate Regulation Act states that the builder must submit the proforma of the builder-buyer agreement sample along with the allotment letter and conveyance deed proposed to be signed with the buyers before the authority at the time of project registration.
The estate regulation and development act also state that the builder will have to carry out the acts and responsibilities as guided by the clauses of the agreement. The agreement will act as a guiding document for the builder-buyer relationship.
The builder cannot ask for more than 10 percent of the property’s value as the earnest money deposit at the time of signing the builder-buyer agreement. Both parties are liable to register this agreement legally so that it is binding.
