How will the new rules help you as a flat owner, what is the legal standpoint and other important points explained
To protect home buyers purchasing new projects in Noida, the Noida Authority has now made it mandatory that a tripartite ‘sale agreement’ be signed between the buyer, builder, and Noida Authority as soon as the buyer pays 10% of the property cost to the developer.
What’s new?
The Noida Authority’s recent decision requires flat registration at the time of initial payment, rather than upon project completion. The tripartite agreement will now have to be registered soon after the builder receives the initial deposit of 10% from the buyer. Currently, buyers and builders enter into an initial agreement on a ₹100 stamp paper and the Authority enters the scene only after the developer has obtained an occupancy certificate and completion certificate for the project.
How will the tripartite agreement rule help homebuyers?
The Noida Authority, at its recent board meeting, decided that builders will now have to initiate registered agreements of sale, or the builder-buyer contract, for buyers who pay 10% of the total property price.
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Experts say that the move is aimed at safeguarding flat buyers and enhancing revenue collection through stamp duty. This will also ensure that the authority is informed of property ownership transfer immediately after the property is purchased and there is transparency in the entire home buying process.
Move aimed at providing clarity over ownership, prevent fraudulent property sales
The tripartite agreement will ensure that the buyers have legal proof of the transaction as soon as they make the 10% deposit. The legal document will include details of the property, the total cost, payment terms and the possession date.
The Authority would now have to be informed about every sale and resale transaction and help prevent tax evasion. It will also prevent resale of properties without informing the Noida Authority being informed about it and prevent tax evasion. There have been instances of buyers selling the unit back to the builder or to a buyer without taking possession and without paying stamp duty. The same unit may have been sold again without the government receiving taxes, said experts.
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The tripartite agreement is as per Section 13 of the Real Estate (Regulation and Development) Act (RERA), which prohibits builders from taking more than 10% of the property cost without a formal agreement. A 2% of the stamp duty will have to be paid initially, and the balance at the time of property possession and final registry.
“The builder will submit a copy of the builder-buyer agreement along with a list of flat buyers. A tripartite deed will be created in favour of the authority, builder, and the flat buyer. Following this, the buyer will be given possession of the flat or shop. This new rule has been implemented for group housing,” M Lokesh, chief executive officer, Noida Authority, was quoted as saying in the press statement.
According to Sunil Tyagi, Managing Partner, ZEUS Law Associates, the registered agreement to sell or builder buyer agreement has dual benefits. On the one hand, it shall protect the rights of both parties during the interim period till the closure of the transaction and on the other hand, it shall increase the stamp duty collections for the state.
Similar to practice followed in Mumbai
This is similar to the practice followed in Mumbai and this requirement is in accordance with the provisions of the Real Estate (Regulation and Development) Act, 2016 (RERA), explained Tyagi.
“A registered agreement to sell or builder buyer agreement ensures that the parties are bound by a legally enforceable document in case of dispute between the parties it may be used as valid evidence in the court of law. A registered agreement to sell/builder buyer agreement would also go a long way in discouraging the circulation of black money in the real estate sector,” he said
The existing legal process
In Noida, the builder/ developer first acquires lease hold rights to the land from Noida Authority by execution and registration of lease deed between the authority and the builder/ developer.
The builder/ developer after obtaining permissions and approvals and registration with Uttar Pradesh Real Estate Regulatory Authority launches sales/ bookings of the saleable areas of the project. Pursuant to which allotments are made in favour of buyers/ allottees.
Upon payment of 10% of the total price of the property, agreement to sell/ builder buyer agreement requires registration and payment of stamp duty. Upon the completion of project, grant of occupation certificate and entire payment of total price of the property, possession is handed over and a tripartite sub lease deed is entered between the builder, buyer, and Noida Authority for the transfer of title of unit in the favour buyer/allotee, explains Tyagi.
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Noida Authority has now mandated the requirement of the presentation of a registered agreement to sell/ builder buyer agreement at the time of registration of such tripartite sub-lease deed which shall ensure that the authority is able to track the entire allotment cycle of a unit from the outset. This move would protect the buyer/allottee from duplicate allotment of the unit already allotted to it, he adds.
Provides an additional layer of security, bolsters buyers’ confidence
By mandating registration from the very start, this new policy promotes transparency and accountability from both developers and homebuyers. For developers, it increases the incentive to adhere to project timelines, while for buyers, it provides an additional layer of security and clarity over ownership, said Sahil Aggarwal, CBO, Nimbus Projects Limited.
“The requirement for early registration will strengthen buyers’ confidence by providing legal reassurance right at the point of investment, reducing uncertainties surrounding possession timelines and project progress,” he said.
“The decision by the Noida Authority to initiate a sale agreement before more than 10% of the collection is a forward-looking measure to safeguard homebuyer interests. By ensuring that buyers are not required to commit a substantial portion of the property value without a formal sale agreement, this move bolsters buyer confidence. Furthermore, the public availability of these documents strengthens transparency around property values, making it easier for buyers to make informed decisions in the market,” said Ravi Nirwal, sales director and principal partner, Square Yards.
Challenges ahead
The new norms will definitely increase transparency in the market. The document will include details such as size of the apartment, price, specifications and delivery timelines, said Venkat Rao of Intygrat, a full-service law firm.
“The only thing that may bother builders would be payment of 2% stamp duty. This may also have an implication on secondary sales as the stamp duty paid on Agreement to Sale (sub lease ) would only be adjustable only if the Lease Deed is executed between the same parties. Therefore, in the event of someone exiting or selling the unit, stamp duty cost may have to be incurred again. I also hope there would be no delays in registration of the agreements as they would now formally involve the Noida and Greater Noida Authorities. The mechanism of draft approval will involve its own set of challenges,” added Rao.