Agreement for Sale vs Sale Deed: What Is the Difference?

Many buyers believe that once an agreement is signed and part of the price is paid, the property is theirs. In law, that is not the case, and the difference between an agreement for sale and a sale deed matters.

What an agreement for sale does

An agreement for sale is a promise: the seller agrees to sell and the buyer agrees to buy, on stated terms such as price, payment schedule and date of completion. Section 54 of the Transfer of Property Act, 1882 states that such a contract does not, by itself, create any interest in or charge on the property.¹

The buyer instead holds a right under the contract. If the seller backs out, the buyer may approach a court for an order compelling the seller to complete the sale. This remedy is called specific performance, under the Specific Relief Act, 1963.²

What a sale deed does

A sale deed (conveyance) is the document that actually transfers ownership. Under Section 54, a sale of tangible immovable property worth one hundred rupees or more can be made only by a registered instrument.¹ Once the sale deed is executed, stamped and registered, title passes to the buyer.

The Supreme Court has made the same point. In Suraj Lamp & Industries v. State of Haryana, it held that an agreement to sell, even with a power of attorney or a will, does not convey title or create an interest in immovable property; ownership passes only through a registered deed of conveyance.³

Why registration of the agreement also matters

Where a buyer has been put in possession under an agreement, Section 53A of the Transfer of Property Act protects that possession in certain cases (the doctrine of part performance). Since the Registration and Other Related Laws (Amendment) Act, 2001, that protection is available only if the agreement is registered, as Section 17(1A) of the Registration Act, 1908 now requires.⁴

Practical points

• Do not treat money receipts or an unregistered agreement as proof of ownership.
• Make sure the agreement states the price, timelines, who pays stamp duty and registration charges, and the consequences of default.
• For a flat in a RERA-registered project, the promoter cannot take more than 10% of the cost before a written agreement for sale is registered.⁵
• After the sale deed is registered, apply for mutation so that the records reflect the new owner.