Transfer Fee on an Under-Construction Flat: What Bangalore Developers Charge

Selling a flat you have only booked, with the building still going up, is not like selling a finished home. The developer's consent is required, and it usually charges a fee for substituting the new buyer. Here is how that fee works in Bangalore, what it costs and what each side should verify.

Why a Developer Gets a Say

Until the sale deed is registered, nothing has been conveyed to the buyer. What the buyer holds is the agreement for sale, which promises a flat on completion at a set price. To resell, the buyer passes this promise on, and the developer must agree to deal with the new person.

The developer's charge for agreeing is called a transfer fee, and some call it an assignment, nomination or endorsement fee. It belongs to the developer under the contract. Stamp duty and registration fees are different, because the government collects those on the sale deed.

The RERA Act backs the arrangement. Its definition of an allottee takes in anyone who later gets the allotment through sale or transfer. A buyer who steps in is therefore entitled to everything the first buyer was, completion date included.

Fee Structures Seen in the City

The Act and the Karnataka rules put no number on the fee. Whatever the agreement says is what applies. Developers generally choose from three structures:

• A per-sq-ft rate on saleable area
• A percentage of the agreement value
• A lump sum for each transfer, set as an administrative charge

Eighteen per cent GST is added, as the fee is payment for a service. Suppose the rate is Rs. 200 per sq ft and the flat measures 1,500 sq ft. That gives a fee of Rs. 3 Lakhs, which becomes Rs. 3.54 Lakhs with GST.

Relatives get a better deal at some developers, who waive or lower the fee for a spouse, parent or child. Others forgo it during promotions. Insist on a written confirmation, since a sales executive's verbal assurance carries little weight later on.

Conditions Attached to a Transfer

The assignment clause lists them, and the typical set includes the following:

• The developer must approve in writing, every time
• A stated percentage of the price, or a number of instalments, has to be paid first
• Overdue amounts and interest must be cleared
• Certain agreements prohibit transfers for a period after booking
• The window closes when the sale deed is registered

After registration the developer drops out. Selling then is an ordinary resale of an owned flat, which needs a new deed with its own stamp duty and registration. Many apartment complexes also charge a transfer fee through the owners' association at that point.

It helps to know why developers collect the fee. Paperwork, record changes, new demand letters and coordination with banks all take effort. Developers also want to discourage quick flips at discounts, which undercut the flats they still have unsold.

Doing the Transfer, Stage by Stage

You will deal with the developer, the buyer taking over and, in most cases, two lenders. This is a workable order:

1. Obtain the fee, GST and conditions from the developer's customer relations desk in writing, after reading the clause yourself
2. Settle all instalments and interest due to date
3. Request an account statement matching each payment received
4. Repay the seller's home loan, or take the bank's no-objection and the original papers back
5. Agree a price with the incoming buyer and put it on paper
6. Pay the fee and sign the transfer documents together with the developer
7. Receive a letter from the developer that recognises the incoming buyer as allottee

A three-party deed, signed by seller, new buyer and developer, is the common instrument. Check with a property lawyer what stamp duty and registration it needs. The final sale deed is registered between the developer and the new buyer directly.

A Checklist for the Person Taking Over

The incoming buyer pays the seller back for what has been paid so far, often with a premium, and pays the developer the rest. Protect that outlay with the following:

• The initial agreement, the allotment letter and all receipts
• An account statement from the developer that agrees with those receipts
• The project's RERA registration, its completion date and a recent progress update
• Written consent from the developer and a confirmation in your name
• A no-dues letter from the seller's bank, where there was a loan
• The balance price, remaining GST and possession-time charges
• The stamp duty and registration cost on the final deed

The agreed price does not rise, which is the appeal of buying a booking when prices climb. Yet the premium to the seller is outside the agreement, and banks lend against the agreement value and the stage of work. Settle your loan early, using the EMI calculator to check the monthly burden.

What a Seller Should Count

Any profit counts as a capital gain from transferring a right in property, taxed as short-term or long-term depending on the holding period. The fee paid to the developer is an expense of the sale. A chartered accountant can calculate the tax before you fix the price.

GST paid earlier on instalments is not returned to the seller, and sellers generally build it into the asking price. Add the broker's commission, the loan closing charge and lawyers' fees. Net of everything, the profit is frequently lower than the jump in the quoted price implies.

When the Developer Overreaches

Complaints usually concern a fee never mentioned in the agreement, a rate raised after booking or consent withheld without cause. Start by writing to the developer and quoting the clause. For a registered project, the Karnataka RERA authority hears complaints between allottees and promoters.

A fee clearly printed in the signed agreement is hard to contest, and an unsupported demand is easier to challenge. That is why the assignment clause deserves attention at booking, not after.

Before You Book: What to Ask

If a transfer abroad or a move is on the cards, or the plan is a short holding, get the exit terms settled first. Ask for answers on these:

• Is a transfer allowed before the deed is registered?
• What is the fee, how is it computed and does GST come on top?
• What share of the price must be paid before a transfer?
• Is a transfer within the family free?
• How many days does a transfer take?

When these are in the agreement, exiting early is simple and costs what you expected. For help reading a clause, write through the contact page.