Is an agreement to sell property legally binding in India?

Yes. An agreement to sell is a legally binding contract under the Indian Contract Act 1872 and the Transfer of Property Act 1882. If either party defaults, the other can seek specific performance (force the sale/purchase through a court) or claim damages.

Must an agreement to sell property be registered in India?

Technically, an agreement to sell immovable property does not require compulsory registration under the Registration Act 1908 (unlike the sale deed). However, registration is highly recommended — an unregistered ATS cannot be used as evidence in court. Many states require registration of agreements for flats under RERA.

Real Estate & Property

Agreement to Sell Property India: Legal Guide, Clauses & Registration

Q: What is the difference between an agreement to sell and a sale deed in India?

An agreement to sell (ATS) is a preliminary contract expressing the intention to sell — title does not transfer to the buyer. A sale deed is the final document that actually transfers ownership. The ATS creates an obligation to execute a sale deed on a future date after conditions (payment, clearances) are met.

Q: What happens to earnest money if the buyer backs out?

If the buyer defaults (fails to pay on schedule or backs out without cause), the seller can forfeit the earnest money/token advance as specified in the ATS. Courts generally enforce this if the amount is a reasonable pre-estimate of loss. If the ATS does not specify forfeiture, the seller can still claim actual damages.

Q: Can a seller back out of an agreement to sell property in India?

If the seller backs out, the buyer can: (a) file a suit for specific performance under Section 10 of the Specific Relief Act 1963, forcing the seller to execute the sale deed, OR (b) claim return of earnest money plus damages. Specific performance is the stronger remedy and courts readily grant it for immovable property contracts.

February 26, 2026•8 min read

Agreement to Sell Property India: Legal Guide, Clauses & Registration

An agreement to sell (ATS) is the critical first legal document in any Indian property transaction. It locks in the price, terms, and timeline before the final sale deed is executed. Yet most property disputes in India arise from poorly drafted ATS documents — missing title verification clauses, unclear earnest money forfeiture, and ambiguous encumbrance conditions. This guide covers every clause you need.

Agreement to Sell vs Sale Deed: The Critical Difference

Agreement to Sell: A contract to transfer property in the future, on fulfillment of conditions. Title does NOT transfer to the buyer at this stage. The buyer gets a right to compel the sale.
Sale Deed: The final document that actually transfers ownership. Title passes to the buyer on registration. Must be registered at the Sub-Registrar's office.

The gap between the ATS and the sale deed is where most Indian property disputes occur — title defects discovered late, seller refusing to execute, buyer unable to complete payment.

Legal Framework

Transfer of Property Act 1882: Sections 53A and 54 govern agreements to sell immovable property
Indian Contract Act 1872: Contract validity and enforcement
Specific Relief Act 1963: Section 10 — specific performance readily available for immovable property contracts
Registration Act 1908: Sale deed above ₹100 value must be registered; ATS registration is optional but strongly recommended

10 Essential Clauses in a Property ATS

1. Clear Property Description

Include: complete address, plot/survey number, area (carpet/built-up/plot), CTS number, Schedule of Property (matching government records). A vague property description is grounds for challenging the entire agreement.

2. Sale Consideration and Payment Schedule

State total agreed price, token advance already paid, balance payment schedule (by dates or conditions), and mode of payment. Note: transactions above ₹50 lakhs require TDS at 1% (Section 194IA) to be deducted by the buyer and deposited before registration.

3. Title Verification and Encumbrance

Include: seller's representation that they have clear, marketable title; that the property is free from encumbrances (mortgages, liens, court attachments); and buyer's right to conduct a title search. Set a timeline for buyer to complete title verification before committing balance payment.

4. Earnest Money / Token Advance

State amount paid as earnest money. If Buyer defaults: seller can forfeit earnest money as compensation (specify this explicitly). If Seller defaults: seller must return double the earnest money (Section 73 ICA) OR the buyer can seek specific performance. Double payment on seller default is a powerful buyer protection tool.

5. Possession Date

State when possession will be handed over — on registration or separately. Specify: vacant and peaceful possession; removal of all movables not included in the sale; handover of all original title documents; and OC (Occupancy Certificate) and other approvals.

6. NOC and Approval Conditions

For flats/plots requiring approvals: agreement should be conditional on seller obtaining all pending NOCs (society NOC, municipal clearance, bank NOC for mortgaged property). A buyer paying for a property without verifying these risks getting stuck.

7. Stamp Duty and Registration Charges

State who bears stamp duty (traditionally the buyer, but negotiable). State the registration cost split. Include: seller's obligation to cooperate in registration — appearing at Sub-Registrar's office, providing original documents.

8. Default and Consequences

For buyer default: forfeiture of earnest money. For seller default: return of double earnest money OR specific performance. Include a realistic timeline — if the ATS is not converted to a sale deed within X days, either party may rescind.

9. Governing Law and Dispute Resolution

Specify: governing law (law of the state where property is located), jurisdiction (civil courts of that district or city). Consider mediation or arbitration for faster resolution — property court cases in India can take a decade.

10. Witness and Execution

Both parties must sign in the presence of at least 2 witnesses. For the ATS to be used as evidence, even if not compulsorily registered, stamp duty on the agreement must be paid (nominal — state-specific). An unstamped ATS will be impounded as evidence in court.

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Frequently Asked Questions

What is the difference between an agreement to sell and a sale deed in India?

An agreement to sell expresses the intention to sell — title does not transfer. A sale deed is the final document that actually transfers ownership. The ATS creates an obligation to execute a sale deed on fulfillment of conditions.

Can a seller back out of an agreement to sell property in India?

If the seller backs out, the buyer can file a suit for specific performance under the Specific Relief Act 1963, forcing the seller to execute the sale deed. Courts readily grant specific performance for immovable property contracts in India.

What happens to earnest money if the buyer backs out?

If the buyer defaults without cause, the seller can forfeit the earnest money as specified in the ATS. If the ATS does not specify forfeiture, the seller can claim actual damages.