Builder-Buyer Agreement Red Flags: 10 Clauses to Check Before You Sign

The builder's office hands you a 60-page agreement and a pen. The sales manager says it is the standard format, everyone signs it, and the bank needs it by Friday. You flip through clauses about force majeure and indemnity, initial every page, and go home. Most buyers do exactly this.

The agreement for sale is the one document where the builder's promises are written down. Once signed and registered, it is what you will rely on if possession is late, the area shrinks or the fittings are not what the brochure showed. Here are ten clauses to read before you sign, with what RERA says about each, as of November 2026.

First, know what 'standard' should mean

RERA rules in most states include a model agreement for sale. Karnataka requires builders to follow its notified format. Builders can add terms, but they cannot add anything that takes away rights the RERA Act or the state rules give you. So 'standard' should mean the RERA format. If the document looks very different, ask which clauses were added and why.

The 10 clauses to check

1. One-sided delay penalties

The classic red flag. You pay 18% a year if an instalment is late. The builder pays ₹5 or ₹10 per sq ft per month if possession is late. On a 1,200 sq ft flat, ₹5 per sq ft is ₹6,000 a month, far less than the rent and EMI you are carrying.

Under RERA, the interest rate the builder charges you for late payment must equal the rate it pays you for late possession. In Karnataka, that rate is SBI's highest MCLR plus 2%. The Supreme Court, in Pioneer Urban Land v. Govindan Raghavan (2019), held that one-sided clauses like this are unfair and cannot be forced on buyers. If your agreement has different rates on each side, ask for it to be corrected.

2. Possession date with an endless grace period

Look for a clear possession date that matches the date on the project's RERA registration. Watch for phrases like 'possession within 36 months plus a grace period of 12 months' or 'subject to timely payment by all allottees'. Your possession should not depend on other buyers paying.

3. A wide force majeure clause

RERA limits force majeure to war, flood, drought, fire, cyclone, earthquake or other natural calamity affecting construction. Some agreements stretch it to 'shortage of labour', 'delay in approvals' or 'market conditions'. Those are business risks, not acts of God. A wide clause is how a builder excuses delays later.

4. Price based on super built-up area

RERA requires flats to be sold on carpet area: the usable floor area inside your walls, excluding external walls, shafts and your exclusive balcony or terrace. The agreement must state the carpet area clearly. It can mention super built-up area too, but the price per sq ft should be tied to carpet area.

Also check the variation clause. RERA-format agreements typically allow small changes in the final carpet area, with a refund if it shrinks and a capped charge (commonly up to 3%) if it grows. An open-ended 'area may vary' with no adjustment is a red flag.

5. Vague specifications

'Vitrified tiles of reputed make' and 'branded CP fittings or equivalent' leave a lot of room. Ask for a specification schedule that names brands or grades for flooring, bathroom fittings, doors, windows, electrical wiring and switches, kitchen platform, lifts and power backup. Brochure photos are not part of the contract unless the agreement says so.

6. The right to change plans

Watch for clauses that let the builder 'revise the layout' or 'add floors or blocks' at its discretion. Under Section 14 of RERA, the builder cannot change the sanctioned plans of your flat without your written consent, and cannot make other major changes to the building without the consent of at least two-thirds of the buyers. An agreement that says you have already consented to future changes is trying to get around this.

7. Harsh cancellation and forfeiture

If you cancel without any fault of the builder, it can usually keep the booking amount. Courts and RERA authorities have generally capped fair forfeiture at around 10% of the price. Watch for clauses that let the builder keep 15% to 20%, keep the GST and brokerage you paid, or refund 'without interest after resale of the unit', which can take years.

Check the reverse too. If the builder cancels or fails to deliver, RERA lets you withdraw and get a full refund with interest. The agreement should not limit that.

8. A payment schedule that runs ahead of construction

The builder cannot take more than 10% before a registered agreement for sale. After that, instalments should be tied to construction stages, like foundation, each slab, brickwork and finishing. Be careful with schedules where 50% or more is due before the structure is complete, or where a large payment is due 'on demand' with no stage attached. Builders must keep 70% of what buyers pay in a separate project bank account for that project, so ask for that account's details.

9. Charges that are not priced

Lines like 'other charges as applicable at the time of possession' are open cheques. Ask the builder to list and price every charge in the agreement:

• Car parking and preferential location charges
• Clubhouse membership
• Advance maintenance and corpus fund
• BESCOM, BWSSB or equivalent utility connection charges
• Legal and documentation fees
• GST on each of the above

10. A short defect liability period

Under Section 14(3) of RERA, the builder must fix any structural defect or poor workmanship you report within five years of possession, free of charge, within 30 days of being told. Some agreements quietly reduce this to one or two years, or exclude 'minor' items like seepage. That clause is not valid against the Act, but it signals how the builder plans to treat complaints.

Other clauses worth a second look

• Arbitration only: an arbitration clause cannot stop you from going to RERA or a consumer commission. The Supreme Court confirmed this for consumer cases in Emaar MGF v. Aftab Singh (2018).
• Transfer fees: if you might sell before possession, check what the builder charges to transfer your booking.
• Handover to the association: the agreement should commit the builder to help form the owners' association and hand over common areas and documents.
• Builder's own loans: if the land or project is mortgaged to a lender, the agreement should say your flat will be released before your sale deed.

How to push back without losing the flat

1. Ask for the draft agreement at booking, before you pay more than the booking amount.
2. Compare it with the model agreement in your state's RERA rules. Mark every clause that differs.
3. Send your concerns in writing, by email, and keep the reply.
4. Get a property lawyer to review the draft. The fee is small next to the price of the flat.
5. If the builder refuses to correct a clause that clearly breaks RERA, treat that as information about the builder.

If you are shortlisting under-construction projects, Skyros Estates can help you check RERA registration, delivery history and agreement terms before you commit.