People use the two terms interchangeably and then discover, sometimes years later, that they never became the owner.
Agreement to sell
A contract recording that the seller will transfer the property on stated terms at a future date, usually on payment of the balance. Section 54 of the Transfer of Property Act, 1882 is explicit: a contract for the sale of immovable property does not, of itself, create any interest in or charge on such property. It gives you contractual rights, not ownership.
Sale deed
The instrument that actually conveys title. For immovable property worth more than one hundred rupees it must be registered under the Registration Act, 1908, and stamp duty must be paid at the applicable rate. Only on registration does ownership pass.
| Agreement to sell | Sale deed | |
|---|---|---|
| Transfers ownership | No | Yes |
| Registration | Not compulsory in most cases | Compulsory |
| Stamp duty | Nominal | Full rate on market value |
| Remedy on breach | Specific performance or damages | Title suit |
What the agreement is genuinely for
- Locking the price and terms while you complete due diligence and arrange finance
- Recording the payment schedule and the date for execution of the sale deed
- Fixing what happens on default on either side, including forfeiture of advance
- Giving you the right to sue for specific performance under the Specific Relief Act if the seller refuses to complete. Note the limitation period for that suit is generally three years from the date fixed for performance, or from when the refusal is known
The arrangement to avoid
Buying on an unregistered agreement plus a general power of attorney and a will, and not executing a sale deed, in order to save stamp duty. The Supreme Court in Suraj Lamp & Industries v. State of Haryana (2011) held that such transactions do not convey title. Buyers in these arrangements own nothing, cannot get a loan, and cannot pass good title on.
Buying on an unregistered agreement plus a general power of attorney and a will, and not executing a sale deed, in order to save stamp duty. The Supreme Court in Suraj Lamp & Industries v. State of Haryana (2011) held that such transactions do not convey title. Buyers in these arrangements own nothing, cannot get a loan, and cannot pass good title on.