What is the correct and legal way to execute a property sale agreement?

 Here is the step-by-step procedure to execute a property sale agreement, which complies with the legal standards

Step 1: Prepare a draft agreement in word format. A draft looks like the below images

Step 2: Share the draft with seller, buyer, advocate, and your bank if you opting for home loan. The intention of sharing is to cross-verify corrections and modifications requires to the draft.

Preferably share through email for the sake of recording your communication.

Step 3: If you are opting for home loan, it's important to frank a sale agreement hence get the confirmation on franking cost from your bank.

Generally, the franking cost is 0.1% of selling price. For example the selling price is Rs. 83,00,000/. The franking cost is Rs. 83,00,000X 0.1% = 8,300/-

But for some cases, if you have good rapport with your bank, your bank may advise you to use only Rs. 200 e-stamp paper instead franking of 0.1% of selling price.

(Many people often confuse with franking and e-stamp. Franking and e-stamp are the two different modes of paying stamp duty to government. It is advisable to use e-stamp if your stamp duty is less than Rs. 500 or use franking mode if your stamp duty is more than Rs. 500 because of the following reason,

• The cost of error is more in e-stamping mode, if small error in e-stamp cannot be corrected later and it's cumbersome to get refund for stamp duty paid. whereas the cost of error is minimal in franking mode as error can be corrected.
• Franking cost is offset during sale deed registration but e-stamp cost is not offset)

Step 4: As per your bank, if your stamp duty is less than Rs. 500, get e-stamp paper from your nearest co-operative bank, court, or sub-registrar office.

Following are the details requires to buy e-stamp paper.

• Seller Name
• Buyer name
• Title of document (Sale agreement / Agreement of sale / Agreement to sell)
• Stamp duty value (For Example Rs. 200 or 500)
• Your contact number (through your contact number not shown on stamp paper, it requires for vendor reference to register on government server)

The cost of e-stamp paper: stamp duty + Rs. 15 vendor processing fee. (For example: the stamp duty is Rs. 200 + 15 = 215/-). The total cost of e-stamp paper is Rs. 215/-

An e-stamp paper looks like the below image.

As per your bank, If your stamp duty is more than Rs. 500/-, prefer to choose electronic franking mode. Franking of two types, they are

• Manual franking
• Electronic franking

Now the manual franking is outdated because it requires a separate machine and a human resource in sub-registrar office. Franking machines are available with very few sub-registrar offices that too most of the time machines may not work or operator will not be available. A manual franking looks like below image

Electronic franking is processed on computer which is super efficient in terms time and operation. To proceed with electronic franking, franking cost is paid in the mode of DD

Say for example : The selling price of a property is Rs. 83,00,000. Bank told us to frank 0.1% of selling price, hence the franking cost is Rs. 83,00,000 X 0.1% = 8,300.

Take a DD in the value of Rs. 8,300/- and in the name of sub-registrar. Bank charge around Rs. 250 to process DD. Below DD image for your reference.

Step 5: Print the drafted sale agreement on the normal A4 size paper. Seller and buyer should sign all pages of sale agreement.

Two witnesses, one from seller and another one from buyer should sign on the last page of sale agreement. Must include witness name, address, and contact number.

Step 6: Carry signed sale agreement and DD to sub-registrar office for franking. (it's not necessarily that both seller and buyer should go to sub-registrar office for franking a sale agreement, anyone or even your sub-ordinate can go for franking a sale agreement)

Step 7: In sub-registrar office, a token number will be allotted, accordingly wait for your turn and submit the DD & signed sale agreement to officer.

An office enters details of DD and applicant name in computer and prints the franking on backside page of your sale agreement.

Below franking image for your reference.

Franking payment receipt will be handed over, below image for your reference,

The electronic franking cost is offset while sale deed registration. For example: At the time of sale deed registration, you shall pay only 5% stamp duty instead 5.1% stamp duty of selling price.

This completes the execution of sale agreement, which complies with legal standards and can be challenged in court in case of any dispute

However for more secure and high-value transactions, one can register the sale agreement. When sale agreement is registered, the transaction details including names of buyer and seller reflect in encumbrance certificate of the property, this deters the seller to deal with any other prospective buyer. The deal is freeze unless both seller and buyer apply cancellation agreement.

Only franking of sale agreement is sufficient for home loan application. Registration of sale agreement is not mandatory for home loan application. FYI

Note: Stamping and registration being state subject, the government charges may vary between states but the procedure of execution is almost the same throughout India. My above answer is more relevant to Karnataka including Bangalore jurisdiction.

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