To most homebuyers, legal terms and concepts almost always seem confusing. Sometimes, it is because of the legal jargon, other times because of the confusing nature of the clauses mentioned. For this reason, homebuyers often consider an agreement to sell to be the same as a sale deed. But, from a legal point of view, there is a difference between the two.

Agreement to Sell

An agreement to sell is also called an agreement for sale and is an agreement designed to sell a property in the future. It specifies the terms and conditions under which the said property will be transferred. Under the Transfer of Property Act of 1882, an agreement to sell is defined as,

"A contract for the sale of immovable property is a contract that a sale of such property shall take place on the terms settled between the parties... It does not, of itself, create any interest in or charge on such property."

The definition implies that the agreement only lists the conditions required to satisfy the future sale of the property; it does not create any title rights for the proposed buyer.

The agreement to sell may or may not result in the actual sale of the said property. However, in some states like Maharashtra, stamp duty laws state that the agreement is subject to the same stamp duty as a conveyance deed.

Sale Deed

A sale deed, on the other hand, is proof that the deal (or agreement) has been finalised and that the said property has been handed over to the buyer by the seller. It could be said that the sale deed is an executed agreement. It establishes the buyer's lawful title over the property, and so, is signed after the sale has taken place. A signed and registered sale deed means that the seller has forfeited any right to the property title in return for the remuneration decided by the agreement to sell.

In cases where homebuyers have purchased a property under sale agreement and have gotten possession, the title of the property remains with the developer unless a sale deed is executed and registered under the Registration Act of 1908. According to the Transfer of Property Act of 1882, an agreement to sell is not a conveyance despite possession.