How to sell an under-construction property?

Key Takeaways

• Direct transfer of under construction property is legal when done with builder consent and proper documentation
• Builder NOC is mandatory and without it the transfer has no standing
• Transfer charges, GST, and stamp duty can add significantly to costs and should be clarified early
• The process usually takes four to six weeks and involves both builder and bank coordination if loans exist
• Sellers must clear dues and secure builder approval while buyers should verify documents and liabilities carefully
• BrickFi helps with builder credibility checks, compliance insights, and cost visibility to make transfers smoother and safer

Overview: Direct Transfer of Under Construction Property

In fast-growing cities, many buyers invest in under construction projects to secure a home or to benefit from early-bird prices. But life has a way of changing plans. A job move, financial need, or even the desire to upgrade often forces buyers to step out before possession. This is where direct transfer of under construction property becomes important.

Direct transfer means handing over your rights and obligations under the builder agreement to another buyer. It is legal when carried out with proper approvals, but it is also layered with rules, charges, and timelines that both parties need to understand. Unlike a traditional resale, you are not selling a completed flat but your contractual rights to one. This difference makes the process unique, and understanding it clearly can save you from future disputes.

Is Selling Under Construction Property Legal in India

Yes, it is legal. What you sell is not the final registered property but your rights under the original agreement with the builder. Builders generally allow this through a process of assignment or transfer, as long as certain conditions are met. You must have cleared all dues, obtained the builder’s consent, and followed the rules in your agreement.

The transfer works because the new buyer steps into your place, taking on the payment schedule and future obligations. Builders insist on formal approval so that they can update their records and ensure there are no disruptions in payments.

Direct Transfer and Assignment Explained

When you sell an under construction unit, there are two common approaches.

In a direct transfer, you and the new buyer sign a transfer agreement, and the builder issues a no objection certificate to confirm acceptance of the change. The builder updates their records to show the new buyer as the allottee.

In an assignment model, the agreement involves all three parties – you, the new buyer, and the builder. The document formally records the transfer of rights and obligations. While the names differ, the goal is the same: to shift your rights and responsibilities to the incoming buyer with the builder’s acknowledgement.

The Role of Builder Approval

The builder’s no objection certificate is non-negotiable. Without it, the transfer has no standing in the builder’s records, and the new buyer may face hurdles in claiming rights later. Builders usually grant this NOC once they are satisfied that all dues are cleared, there are no pending penalties, and the transfer complies with project rules.

It is common for agreements to mention conditions around when transfers can be made. Some projects may restrict transfers in the early stages of construction or place a cap on the number of times a unit can be reassigned. Checking your original allotment or builder-buyer agreement is the first step before considering a transfer.

Key Documents Required

For a direct transfer, both seller and buyer should prepare and verify a set of important documents.

• The original builder-buyer agreement or allotment letter
• All payment receipts made till date
• Builder NOC approving the transfer
• Transfer or assignment deed recording the handover
• Updated KYC documents of the new buyer
• Loan NOC from the bank if the original buyer had a home loan
• Confirmation from the builder updating their records with the new buyer’s name

Having all of these in place reduces the risk of disputes and ensures the new buyer gets a clean slate.

Costs and Charges in a Transfer

Transfer charges are one of the first things to factor in. Builders typically charge between two to five percent of the property value as transfer fees. This can be a significant sum, so both buyers and sellers should account for it while negotiating the final price.

GST may apply depending on the stage of construction. Since the transfer is for rights in an under construction property, GST liability can arise on the transaction amount. Buyers should not assume it is waived and must clarify this point in writing with the builder.

Apart from these, there may be stamp duty on the transfer deed, registration costs depending on state rules, and administrative charges for updating builder records. These smaller charges can add up, so planning ahead is important.

How Long Does the Process Take

The process usually takes four to six weeks. Sellers must first clear any pending dues and apply for the builder’s NOC. Once the NOC is issued, the transfer deed is prepared, payments are reconciled, and documents are submitted to the builder. If a loan is involved, additional time is needed for the bank’s approval or loan substitution.

The most common delays happen when dues are not fully cleared, when the builder is slow to respond, or when loan coordination takes longer than expected. Allowing some buffer time helps avoid last-minute stress.

Pricing Strategy for a Transfer

Pricing an under construction property for transfer needs careful thought. Sellers usually calculate it as the total amount paid so far plus a premium for appreciation, minus any remaining dues and charges like transfer fees.

For buyers, the advantage is often in securing a home at a price lower than fresh bookings or entering a project that has sold out. Transparency is the key. Sellers should share receipts and dues statements clearly so that the buyer knows exactly what they are paying for.

Risks to Watch Out For

There are several pitfalls that first-time sellers and buyers may miss.

Some agreements restrict transfers in early stages, so trying to sell without checking the fine print can backfire. Pending instalments or penalties can block the builder from issuing a NOC. Buyers sometimes underestimate the impact of GST or stamp duty, leading to disputes later.

Verbal commitments without proper documentation are risky. Every payment and agreement should be recorded in writing. Trying to bypass official transfer charges may save money upfront but leaves both parties exposed to future disputes.

If a home loan is involved, failing to secure the lender’s approval can lead to major problems. The new buyer may find themselves liable for the old loan unless the process is formally completed.

Handling Loans During Transfers

When the original buyer has taken a home loan, the lender’s role becomes critical. Banks may allow substitution of the borrower, transferring the loan to the new buyer. In some cases, they may require the seller to close the existing loan before the transfer. This step often extends the process, so it should be factored into timelines.

The new buyer must always demand a loan clearance certificate if the loan is closed, or official substitution documents if the loan continues in their name. Ignoring this step could leave hidden liabilities attached to the property.

The Role of BrickFi in Smooth Transfers

For many buyers and sellers, navigating assignment or direct transfer feels overwhelming. The mix of builder approvals, legal documents, and tax implications can be daunting. BrickFi helps by providing builder credibility checks, project compliance status, and data-driven insights into fair transfer charges.

Instead of relying on guesswork or verbal assurances, BrickFi gives both buyers and sellers clear visibility of risks and costs. From GST implications to negotiation support, it acts as a guide to make the process more transparent and less stressful.

Direct Transfer of Under Construction Property: What Buyers and Sellers Should Remember

Selling an under construction property is possible and legal, but it is not the same as a completed flat resale. It involves transferring your contractual rights, obtaining builder consent, paying charges, and ensuring compliance.

Sellers should clear dues and secure the builder’s approval, while buyers should verify documents and understand all charges upfront. Both sides must be patient with timelines and careful with paperwork.

Assignment or direct transfer can be a practical way to exit or enter a project mid-way, but it comes with responsibilities. With BrickFi’s insights on builder credibility, compliance, and cost clarity, you can make informed choices that protect your investment and give you peace of mind.

FAQs: Direct Transfer of Under Construction Property

1. Can I sell my under construction flat before registration?

Yes, you can. What you transfer is your contractual rights under the builder-buyer agreement, not the final registered property. You need the builder’s consent through a no objection certificate for it to be valid.

2. How much do builders charge for transfer of under construction property?

Most builders charge a transfer fee between two and five percent of the property’s value. The exact amount depends on the builder’s policies and stage of construction.

3. Is GST applicable on assignment of an under construction property?

Yes, GST may apply if the project is still under construction. The tax is calculated on the transfer consideration. Always confirm the GST treatment with the builder before signing.

4. What happens if there is a home loan on the property being transferred?

If the seller has a loan, the bank’s approval is mandatory. The bank may allow substitution of the borrower or may ask for the loan to be closed before transfer. Without this, the liability could continue in the seller’s name.

5. Can a builder refuse to approve the transfer?

A builder can refuse if dues are pending, if the agreement restricts early transfers, or if multiple transfers are not permitted. This is why checking the original contract and clearing all payments is essential before applying for a transfer.