An agreement to sell is a promise to transfer a property in the future. A sale deed is the transfer itself. Buyers who pay a large amount against an agreement often believe the property is already theirs. Under Indian law, it is not.
The agreement to sell
The agreement to sell records the terms both sides have agreed on: the property, the price, the payment schedule, the date for completing the sale, and what happens if either side backs out.
Under Section 54 of the Transfer of Property Act, 1882, an agreement to sell does not by itself create any interest in or charge on the property. The seller remains the owner until the sale is completed.
What the buyer gets is a contractual right. If the seller refuses to complete the sale without a valid reason, the buyer can go to court and ask for specific performance, which is an order directing the seller to execute the sale deed. The buyer must show they were always ready and willing to pay the balance. A suit for specific performance generally has to be filed within three years of the date fixed for completion, or of the date the seller refused.
The sale deed
The sale deed is the document that actually transfers ownership. For immovable property worth one hundred rupees or more, the sale must be made by a registered instrument. In practice this means:
- the deed is printed on stamp paper, or stamp duty is paid electronically, at the rate fixed by the state;
- both parties, or their authorised representatives, appear before the Sub-Registrar with two witnesses;
- the deed is registered, and ownership passes to the buyer.
After registration, the buyer should apply for mutation so the records show their name.
Side by side
| Agreement to sell | Sale deed | |
|---|---|---|
| What it does | Promise to transfer later | Transfers ownership |
| Owner after signing | Seller | Buyer |
| Registration | Needed in some cases (see below) | Compulsory |
| Buyer’s remedy if things go wrong | Suit for specific performance or refund | Rights of an owner |
When the agreement should be registered
If the buyer is given possession under the agreement and wants the protection of part performance under Section 53A of the Transfer of Property Act, the agreement must be registered. In some states, stamp duty is also payable on such an agreement as if it were a sale.
GPA and will transactions
For many years, properties were bought on a combination of an agreement to sell, a general power of attorney and a will, without a registered sale deed. In 2011 the Supreme Court held that such documents do not transfer ownership. A buyer holding only these documents should consider getting a registered sale deed executed.
What to check before signing an agreement
- The seller’s title chain and the latest mutation entry.
- That no loan, lien or court case is pending on the property.
- A clear date for the sale deed and what happens to the earnest money if either side defaults.
- Who bears stamp duty, registration charges and pending dues.
This note is for general information only and is not legal advice. Stamp duty, registration rules and limitation periods should be checked for the specific property and state.
