Land Share Agreement and Construction Agreement: Buying an Unfinished Flat in Bangalore

A booking for an unfinished flat in Bangalore sometimes leads to two contracts rather than the usual single one. Each rests on a different promise, with land in the first and the building in the second. The notes below show how both work, what RERA makes of the arrangement, where each tax falls and what a buyer should confirm before signing.

Why One Flat Gets Two Contracts

An apartment purchase brings a built home and a fractional claim on the ground beneath the whole development. That claim is the undivided share, shortened to UDS. During launch and construction the ground exists but the home does not, so sellers tie the buyer to the land portion in one contract and to construction in another.

Joint development made this routine in the city. One party owns the plot and another builds on it, so each contract is signed by whoever controls the thing being promised.

Inside the Land Contract

This is the title-side document. A schedule lists the complete plot, and the buyer's slice is then marked out both in square feet and as a share of the plot's total area. The contract adds the price for the slice and names the plot's owners.

At this stage the seller only commits to convey later, and ownership moves on registration of the deed of sale. Among all the figures here, the UDS carries the greatest weight, since it governs what an owner receives if the project is redeveloped or the land acquired. Compare it with the number the project papers carry for that very flat.

Inside the Building Contract

Think of this one as the specification sheet. It identifies the unit by its number, tower and floor, and a buyer returns to it far more often than to the land paper. If it is thin, a precise land agreement does little to help.

A well-drafted version spells out the following.

• The flat's carpet area, along with the sanctioned plan it follows
• Finishes for the kitchen and bathrooms, plus the structure, windows, doors and floors
• The amount and timing of every stage payment
• Completion and possession dates
• Penal interest for lateness, whichever side is late
• Parking allotment, amenities and the buyer's share of common areas

Both contracts must refer to one flat and one buyer, and their prices must add up to what was agreed at booking. A cross-default clause is useful as well, so that a breach of the first counts as a breach of the second.

How RERA Treats the Arrangement

The central RERA law of 2016 speaks of one "agreement for sale". Section 13 bars a promoter from taking an advance above a tenth of the price before the agreement is executed and registered. Karnataka issued its model form in 2020, and numerous developers in Bangalore now offer a single contract.

Projects that still use two papers remain covered. Carpet area, total price, date of possession, interest on late delivery and a five-year liability for structural defects attach to the entire purchase. If either contract carries a term at odds with the statute, the statute wins.

A simple test applies. Read the pair as though it were one agreement for sale and look for every item the statute expects. If the possession date or interest on delay is absent from both, get it written in before the next payment.

Where GST and Stamp Duty Land

Each levy is attached to its own stage. GST rides on the construction instalments, and stamp duty with registration charges are settled at the sale deed instead. A flat bought after the occupancy certificate is issued carries no GST.

GST comes to 5% (1% in the affordable category), and a third of the price is deemed land inside that rate. Tax is measured on the two contracts combined, so moving rupees from one paper to the other does not lower it.

For property worth more than Rs. 45 Lakhs Karnataka levies 5% stamp duty, or 5.6% counting cess and surcharge, along with a 2% registration charge. The deed at completion conveys flat and land share together, so duty is computed on the full value, meaning the higher of price and guidance value.

Suppose the total cost of the flat is Rs. 1.2 Crore. The outgo is then as follows.

• GST (5%): Rs. 6 Lakhs, spread across the instalments
• Stamp duty (5.6%): Rs. 6.72 Lakhs, due when the deed is signed
• Registration charge (2%): Rs. 2.4 Lakhs, due at the same time

A 2025 Karnataka High Court ruling holds that the charge depends on what the deed actually conveys, so a deed transferring just an undivided land share attracts duty on that share only. That is no reason to understate value, because a low declared price brings tax and ownership disputes in future. Use the EMI calculator to see the monthly cost of a loan.

What the Lender Wants

A bank funding an unfinished flat asks for both contracts, as its money covers land and construction together. Many banks also execute a tripartite agreement along with the buyer and builder. Funds then go out in stages as the building rises, and the builder undertakes to hand the title documents to the bank.

The stage payments in the building contract should line up with those in the bank's sanction letter. Where they differ, the buyer may need to pay a tranche personally before the bank's trigger point arrives. The tripartite agreement is an addition to the two contracts and does not displace either.

The Deed That Finishes the Purchase

Ownership reaches the buyer by a registered conveyance deed, which the promoter must execute under section 17, normally after the occupancy certificate. Both the flat and its undivided share must appear in it.

Verify its figures against the earlier papers, namely UDS, carpet area, parking and flat number. An error found later calls for a rectification deed, and that eats both time and fees.

Eight Questions to Answer Before Signing

Because the deal rests on two papers, a property lawyer should study both drafts side by side before the first is signed. These questions need a clear answer.

1. Is the UDS equal to the share the project filings list for this flat?
2. Did the landowner sign personally, or is a registered power of attorney held by the developer?
3. Do tower, floor, flat number and parking slot read identically in each paper?
4. Does the combined price match the cost sheet?
5. Is the handover date written in, together with interest on delay?
6. Is the specification a detailed schedule?
7. Will the agreement be registered once payments pass 10% of the cost?
8. Does a default clause link the two papers as one deal?

One RERA agreement for sale is easier to review, with every term in a single place. The older two-paper pattern still works legally as long as neither document leaves gaps or contradicts the other. To get draft agreements for a given project, use the contact page and our team will help.