Agreement to Sell in Real Estate: Homebuyer’s Guide to Clauses & Red Flags

Buying a home is exciting but it also comes with a lot of paperwork that most people aren’t prepared for. One of the most important documents in this process is the Agreement to Sell (ATS). It’s the legal contract that defines the terms between you and the builder or seller, from how payments will be made to when the property will be handed over and what happens if there are delays.

Many buyers tend to treat it as a formality but understanding the Agreement to Sell is crucial. A well-drafted ATS can protect your rights and give you clarity while a poorly understood one can lead to confusion, disputes or even financial setbacks.

In this guide, we’ll explain what an Agreement to Sell really means, why it matters in real estate transactions and the key points every homebuyer should review before signing.

What is an ATS?

When you decide to buy a property, you don’t immediately become its owner. The first legal step in the journey is the Agreement to Sell (ATS). This document is essentially a contract between the buyer and the seller/developer that includes the terms of the deal.

It usually includes:

• The agreed property price and payment schedule.
• The date by which the developer promises to hand over the property.
• The obligations of both parties, for example, the buyer paying on time and the builder completing construction as per plan.
• Penalties in case either side defaults.

However, it’s important to understand what the ATS does not do, which is that it doesn’t transfer ownership. Even with your name on the agreement, you are not yet the legal owner of the property. Legal ownership is only established once the Sale Deed is executed and registered with the sub-registrar’s office.

So, ATS is the binding promise that secures your rights and locks in the terms of purchase, while the Sale Deed is the final step that gives you complete ownership.

The Non-Negotiables Inside an ATS

Every Agreement to Sell looks loaded with legal jargon but there are a few things you should be able to spot almost immediately. If these points aren’t clear, it’s a red flag.

1. Property details – Make sure the agreement clearly mentions your flat number, tower/block, carpet area, parking slot and any other specifics. Ambiguity here can cause disputes later.
2. Total cost and payment schedule – The ATS should break down the complete cost, including GST, floor rise charges, preferential location charges (PLC) and any extras. It should also mention when each instalment is due.
3. Possession date and grace period – This is one of the most critical points. Look for the possession date and check how much “grace period” the builder has reserved for delays.
4. Refund and cancellation terms – Life situations change and sometimes buyers need to exit. The ATS should clearly mention how cancellations are handled and what part of the money is refundable.
5. Force majeure clause – This covers delays caused by reasons beyond the builder’s control (like natural disasters, government bans or pandemics). While this clause is standard, check how broadly it’s worded.

Red Flags to Watch Out for in an Agreement to Sell

While an ATS is meant to protect both buyer and seller, many agreements are drafted heavily in favour of the developer. Here are some common red flags you should watch for:

• Endless grace periods – If you see grace periods stretching to 18-24 months, that’s not flexibility, that’s the builder buying extra time. A reasonable grace period is usually a few months, not years.
• One-sided penalties – Many agreements impose steep interest (say, 12-15%) if a buyer delays payments, but barely compensate if the builder misses deadlines. Always check if the penalty clauses work both ways.
• Vague possession clauses – Phrases like “subject to approvals” or “subject to formalities” may sound harmless but they effectively give the builder a free pass on timelines. Look for a clear possession date in writing.
• Escalation in cost – Watch out for clauses that allow the builder to charge extra later, often under headings like “betterment charges” or “raw material cost.” These can lead to unexpected bills.
• Misuse of force majeure – Force majeure is meant for genuine events beyond anyone’s control like natural disasters or government restrictions. But if the agreement lists vague reasons like “economic slowdown” or “labour shortage,” it’s a loophole that can be misused.

How to Protect Yourself Before Signing ATS?

It’s easy to feel pressured into signing whatever the builder places in front of you but a little caution at this stage can save you years of stress later. Here are some practical ways to safeguard your interests:

1. Check RERA alignment – Every state’s RERA has issued a Model Agreement to Sell designed to be fair to both buyers and developers. Compare your draft with the model version and major deviations should raise questions.
2. Cap the grace period – Grace period of a few months is understandable but anything close to two years is unreasonable. Try to negotiate a maximum of six months.
3. Insist on reciprocity – Penalties shouldn’t be one-sided. If you’re charged 12% interest for delayed payments, the builder should face the same if possession is delayed.
4. Demand clarity on refunds – If for any reason the transaction is cancelled, the agreement should clearly state the refund process, ideally with interest and within a fixed period (90 days is common).
5. Strike out vague escalation clauses – Builders sometimes add clauses allowing extra charges for “betterment” or “increase in raw material costs.” Unless there’s a regulator’s approval, these can be unfair.
6. Get an independent lawyer – Don’t rely only on the builder’s lawyer. Hiring your own legal expert may feel like an added cost, but it’s the best insurance against signing something that hurts you later.

Unfair Clauses You’ll Commonly See in an ATS

Many Agreements to Sell are tilted in favour of the builder. While some terms are standard, others can put the buyer at a huge disadvantage. Here are a few unfair clauses you’ll often come across:

1. Heavy penalties for buyer delays – A common clause states that if the buyer misses payments, the builder can cancel the booking and forfeit up to 10% of the property value. While timely payment is important, such harsh penalties can feel disproportionate compared to what builders face for delays.
2. Soft treatment for builder delays – On the flip side, many agreements say that if the builder delays possession, the refund will be given “when feasible”, often with no mention of interest. This leaves buyers waiting indefinitely with no real compensation.
3. Arbitration only in the builder’s city – Some agreements state that if disputes arise, arbitration must be held in the city where the builder’s office is located. This can be an intimidation tactic as it increases travel and legal costs for the buyer. In reality, such clauses are not legally binding under RERA, which empowers buyers to file complaints in their own jurisdiction.

Consumer Checklist: What the ATS Usually Says vs What You Should Insist On

To help you spot unfair terms quickly, here’s a simple comparison between the typical clauses you’ll find and the smarter fixes every buyer should push for:

Final Word

When it comes to homebuying, the Agreement to Sell often feels like just another formality. But in reality, it’s the document that decides whether your journey ends with peace of mind or endless disputes.

Read the ATS with a bit of healthy suspicion. Ask yourself: “If things don’t go as planned, does this clause still protect me?” If the answer is no, push for clarity before signing.

At Propsoch, we don’t stop at helping you pick the right project. Once you’ve booked with us, you also get access to legal due diligence support and home loan guidance, so every step of your homebuying journey feels clear and stress-free.

Read the terms and conditions on our website to know more.