I. BACKGROUND
The real estate sector which is notorious for incomplete projects and long delays in handing over
possession, increasing super built areas and payment without the consent of the buyers, one sided
agreements with unreasonable provisions in favour of the real estate developers are finally being
regulated. The Ministry of Housing and Urban Poverty Alleviation has, on October 31, 2016, notified
Real Estate (Regulation and Development) (Agreement for Sale) Rules, 2016 (“Rules”), for each of
the five Union Territories of Andaman & Nicobar Islands, Dadra & Nagar Haveli, Daman & Diu,
Lakshwadeep and Chandigarh.
These Rules (read with the Real Estate (Regulation and Development) Act, 2016 (“Real Estate Act”))
essentially mean that an agreement for sale between a promoter (i.e. the builder/developer) and an
allottee (i.e. the buyer) now has to be in the format prescribed by the Rules (“Sale Agreement”), in the
aforesaid Union Territories.
The Central Government is reportedly also set to launch similar rules for National Capital Region of
Delhi. We may add that under Section 84(2)(h) of the Real Estate Act, each of the State Government
was required to formulate rules in relation to the form and particulars of an agreement for sale between
the promoter and the allottee, within a period of 6 months (which deadline has already elapsed).

II. CERTAIN KEY ASPECTS OF THE SALE AGREEMENT

(i) Delivery of Possession: The Sale Agreement contemplates delivery of possession of the
apartment/plot to the allottee by the promoter by a specific date (which is to be mentioned upfront in
the agreement), unless there is a delay due to Force Majeure events. In the event it becomes
impossible for the promoter to implement the project due to Force Majeure conditions, the allotment
will stand terminated and the promoter will refund to the allottee the entire amount received within 45
days from the termination date.
(ii) Cancellation by Allottee: Allottees have been given rights under the Sale Agreement to cancel the
allotment as per the Real Estate (Regulation and Development) Act, 2016 (“Real Estate Act”). The
Sale Agreement also makes it clear that if an allottee cancels an allotment on no fault of the promoter,
even then the promoter can forfeit only the booking amount paid and has to refund the balance amount
paid within 45 days of cancellation.
(iii) Compensation: The promoter is also required to compensate the allottee in accordance with the
provisions of the Real Estate Act, in case any loss is caused to the allottee on account of defective title
of the land. Further, the claim for interest and compensation is not barred by limitation under applicable
laws.
Except in case of Force Majeure event, if the promoter fails to deliver possession in accordance with
the Sale Agreement or due to discontinued business on account of suspension/revocation of his
registration or for any other reason; and the allottee wishes to withdraw from the project, then the
promoter is required to refund the total amount received along with interest including compensation in
the manner provided under the Real Estate Act.

Where an allottee chooses not to withdraw, the promoter is required to pay interest to the allottee for
every month of delay till possession is handed over.

(iv) Defaults by Promoter and Remedies: Subject to Force Majeure provision, upon promoter’s failure to
provide possession within the specified time period or discontinuance of the promoter’s business as a
developer on account of suspension/revocation of his registration, the allottee has the right to:
 stop making further payments, until completion of the construction milestones; or
 terminate the agreement in which case the promoter will have to refund the entire money paid
along with interest (as prescribed under the relevant rules) within 45 days of receiving the
termination notice.
 If an allottee does not terminate the agreement, then the allottee will be paid interest at the
prescribed rate for every month of delay till the handing over of possession.

III. CONCLUSION
Prescription of this Sale Agreement format (which focuses on protection of real estate consumers inter
alia from delays and defaults by promoters), is a significant development, as sale agreements between
promoter and allottee typically tend to be lopsided in favour of the promoter.
Even the courts have initiated a strict enforcement drive against the promoters for delay in handing
over possession and non-payment of interest to the allottee for long periods of delay. Recently, in a
case before the National Consumer Disputes Redressal Commission (“NCDRC”), the NCDRC, while
deciding an execution application regarding a dispute between an allottee and a builder, the NCDRC
ordered the arrest of the Director and the General Manager of the builder company for failure to appear
before the relevant court and to comply with the order of the subordinate court related to delay in
possession of flats.
With the introduction of the widely anticipated Real Estate Act, followed by notification of rules pursuant
thereto in certain states and Union Territories, the real estate sector is set to become one of the highest
regulated sectors in the country and rightly so due to the continued arbitrary and irrational conduct of
the promoters for long.