M3M Blog : Sale Agreement Checks Before Paying Booking Amount | RERA Guide

RERA’s Primary Guardrail: The 10% Payment Cap

The most fundamental safeguard provided by RERA is enshrined in Section 13(2), which directly governs the booking process:

A promoter (developer) cannot accept more than 10% of the total property cost as an advance or booking amount without first entering into a formal, registered Agreement for Sale.

If a developer requests an amount exceeding 10% before the agreement is formally signed and registered, they violate RERA. Your initial check must ensure the amount you are paying adheres to this ceiling. Ideally, insist on receiving and reviewing the draft agreement before making any payment to maximize your negotiation leverage.

I. Legal Certainty: Project Due Diligence and Title Integrity

Before discussing money, the legal certainty of the property and the project must be established. This is particularly crucial for any significant investment, including specialized assets such as an industrial plot in Manesar.

1. RERA Registration and Compliance

The agreement must explicitly state and adhere to RERA norms:

• RERA Registration Number: This unique number must be stated clearly and should match the details verifiable on the respective state's RERA portal. For projects by M3M India, this ensures adherence to the highest regulatory standards.
• Compliance Statement: A clause confirming that the agreement aligns with all provisions of the RERA Act, including the carpet area definition, project timelines, and compensation clauses.
• Project Details Verification: Cross-verify that the project name, location (e.g., M3M Manesar), the developer’s identity, and the promised completion date exactly match the details filed on the official RERA website.

Why it matters: Buying an unregistered project severely compromises your legal recourse, making RERA adherence the baseline for any investment.

2. Clear Title and Development Rights

The agreement must provide absolute assurance regarding the land’s legal status.

• Clear Title Warranty: The developer must unequivocally warrant that the land is free from all encumbrances, litigation, prior mortgages, or disputes. This is vital for projects involving large land parcels, such as those within GIC (Gurgaon International City).
• Development Rights Confirmation: If the developer is building on land owned by a third party (e.g., a Landowner agreement), the agreement must confirm that M3M India or the designated developer holds all necessary, legal Development Rights and Power of Attorney (PoA) to execute the project.
• Indemnity Clause: Look for a strong clause where the developer indemnifies the buyer against any financial loss or liability arising from current or future title disputes concerning the land.

3. Approvals and Sanctioned Plans

The agreement must confirm that all necessary governmental clearances have been obtained or clearly state the timeline for pending approvals.

• Sanctioned Layout Plan (SLP): The agreement must explicitly reference the project’s layout and building plans approved by the local authorities (e.g., DTCP, Municipal Corporation).
• No Unilateral Changes: Under RERA, any significant change (over 10% alteration to the carpet area or layout of an apartment/plot) requires the written consent of a majority of allottees. Ensure the agreement does not contain vague clauses that permit the builder to make drastic, unapproved alterations.

II. Financial Transparency: The Price and Area Mandates

The sale agreement is the only document that legally locks in the price. Absolute transparency here prevents budget overruns later.

4. Comprehensive Definition of Total Sale Consideration

The agreement must provide a line-by-line breakdown of the total price, leaving no room for hidden charges.

Base Price/Basic Sale Price (BSP): The core price based on the promised Carpet Area.

Mandatory Charges: All non-negotiable fees must be listed:

Preferential Location Charges (PLC) or Floor Rise Charges (FRC), if applicable.

Leasehold Charges (if applicable to the plot, as may be the case for certain M3M Manesar projects).

Parking Allocation Charges (including the specific type and number of units allocated).

Internal Electrification/Water/Sewer Connection Fees, External Development Charges (EDC), and Infrastructure Development Charges (IDC).

Taxes and Deposits: Clearly state the liability for GST, Stamp Duty, Registration charges, and the one-time Corpus Fund/Maintenance Deposit.

5. Carpet Area Specification and 3% Tolerance

RERA mandates that all residential property transactions be based on the Carpet Area (the net usable floor area). For an industrial plot in Manesar, the area must be specified with precision.

Metric and Definition: The exact carpet area (for residential) or plot area (for industrial/commercial) must be stated clearly, adhering to the RERA definition.

Area Variation Clause: RERA protects buyers by setting a strict tolerance limit:

• If the area increases by more than 3%, the developer cannot charge you for the excess.
• If the area decreases, the developer must refund the difference with interest. Ensure this 3% tolerance limit is stipulated in the agreement.

6. Payment Schedule and Construction Linkage

The payment plan must be clear and tied unequivocally to verifiable construction milestones, not arbitrary dates.

• Construction Linked Plan (CLP): The agreement must specify the percentage of payment due at each physical construction stage (e.g., 15% at foundation, 10% at 5th floor slab, etc.). This minimises financial risk.
• Escrow Account Assurance: RERA requires that 70% of the money collected from allottees be kept in a separate escrow account and used only for the project's construction and land cost. The agreement should confirm adherence to this crucial financial safeguard.
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III. Possession, Delay, and Compensation Safeguards

These clauses are the foundation of buyer protection, defining timely delivery and recourse against default.

7. The Possession Date and Compensation

The agreement must state the firm Date of Possession committed by M3M India or the developer, matching the date on the RERA portal.

• Grace Period: While a grace period (e.g., 6 to 9 months) for unforeseen minor delays is common, ensure it is reasonable and explicitly defined.
• Interest on Delay (IOD): This is the most crucial clause. If the developer delays possession beyond the committed date (plus grace period), they must pay the buyer compensation. The RERA-mandated rate is typically the State Bank of India's Marginal Cost of Funds-Based Lending Rate (MCLR) plus 2%. Ensure the agreement reflects this equitable rate.

8. The Right to Withdraw

The agreement must clearly outline your right to exit the project in case of a major, prolonged delay.

• Withdrawal Threshold: The agreement should grant the buyer the right to withdraw after a specified, significant delay (usually 12 months beyond the committed date).
• Full Refund with Interest: Upon withdrawal due to builder delay, the buyer is entitled to a full refund of the amount paid, plus the RERA-prescribed interest rate.

9. Equitable Buyer Penalty and Forfeiture

While the developer’s liability for delay is set, the penalty for the buyer’s delayed payment must also be fair.

• Fair Penalty Rate: Ideally, the interest rate charged to the buyer for late payment should be the same as the one the developer pays the buyer for their delay (SBI MCLR+ 2%).
• Cancellation Policy: If you need to cancel, the agreement must clearly state the deduction amount. RERA generally allows the developer to deduct a reasonable administrative charge (e.g., 2%-5% of the total cost). Never agree to a clause that results in the forfeiture of the entire booking amount.

IV. Post-Possession and Integrated Project Specifics

For specialized and integrated projects like the M3M Innovation Park within GIC, certain clauses require extra scrutiny.

10. Structural Defect Liability Period (DLP)

A quality assurance mandated by RERA is particularly important for complex structures.

• Five-Year Warranty: The developer must commit to fixing any structural defects or flaws in workmanship that appear within five years of handing over possession, free of charge. This is essential for the high-load industrial plots in Manesar, where structural integrity is critical.

11. Specifications and Amenities Guarantee

The quality of construction and delivered amenities must match the promise.

• Material Specification: The agreement must list the brand and quality of all major fittings, from flooring to façade materials. This prevents the developer from downgrading materials (e.g., using lower-quality tiles or electrical fittings).
• GIC Masterplan Commitment: For projects like M3M Innovation Park, the agreement should refer to the overall masterplan for GIC and guarantee the provision of common infrastructure like internal roads, drainage, water treatment, and security systems.

12. Force Majeure and Disaster Clauses

This clause excuses delays due to genuine, unforeseen events (natural disasters, war, court stay orders).

• Strict Definition: Ensure the clause is strictly defined and cannot be used vaguely to justify delays (e.g., "economic downturn" or "labour shortage" are generally not acceptable Force Majeure events).

V. The Smart Investor’s Action Plan

Before finalizing the purchase of your property or industrial plot in Manesar, follow this checklist:

• Engage Independent Legal Counsel: Always seek a specialised property lawyer to review the Sale Agreement. The money spent on legal review is your cheapest form of insurance.
• Verify Developer Track Record: For projects like M3M Innovation Park, research the track record of M3M India for timely delivery and quality across their completed projects.
• Insist on the Draft: Demand a draft copy of the Sale Agreement and take several days to review it before paying the booking amount.

By meticulously scrutinising these clauses, you ensure that your investment in a premium segment property, be it a luxury home or a strategic industrial asset, is legally protected and aligned with the promises made by the developer.