When you buy an under-construction apartment with a home loan, you will often sign a document with three parties: you, the builder and the bank. It is called a tripartite agreement. It is short, but it matters.
Why three parties are needed
Normally, a home loan is between you and the bank. But for an under-construction home, the bank pays the builder directly, and the home does not fully exist yet. The bank needs the builder to promise certain things too, so all three sign.
What each party usually agrees to
- You: to repay the loan and keep the home as security for the bank.
- The builder: to use the money for the project, and to note the bank's interest on your home.
- The bank: to pay the builder in stages as work is done.
If the booking is cancelled
A key clause covers what happens if you cancel. The builder usually agrees to send any refund to the bank first, to clear your loan, and only then to you.
How it fits with your agreement for sale
The agreement for sale is between you and the builder, and sets out the home, price and timeline. The tripartite agreement adds the bank's protection on top. If the two seem to clash, ask the bank and the builder to explain before you sign.
If the project is delayed
Your EMI or pre-EMI to the bank usually continues even if construction is slow. Under RERA, if the builder fails to give possession as agreed, you have remedies such as interest for delay or a refund with interest. The tripartite agreement does not remove your loan obligation in the meantime.
"Approved by the bank" does not mean guaranteed
A bank approving a project for loans means its lawyers and engineers have reviewed it. It is useful, but it is not a guarantee of on-time delivery. Do your own checks too.
Questions to ask before you sign
- Where will a refund go if I cancel?
- What happens to my loan if the project is delayed?
- When will the original documents reach the bank?
- Is the project registered under RERA?
The words in the agreement, in plain English
- Mortgage or charge: the bank's right over your home until the loan is repaid.
- Lien: the builder's note that the bank has first claim on your home.
- Disbursement: money the bank pays to the builder for you.
- Buy-back clause: in some agreements, a promise by the builder to refund the bank if the sale fails. Not every agreement has it. Read whether yours does.
- Original documents: the papers the bank keeps as security, usually the registered agreement and later the sale deed.
How it works, step by step
- You sign the agreement for sale with the builder and register it.
- The bank sanctions your loan after its legal and technical checks.
- All three parties sign the tripartite agreement. The builder confirms the bank's interest in your home.
- The builder raises a demand each time a stage is completed.
- You pay your share and forward the demand to the bank.
- The bank pays the builder directly and you begin pre-EMI or EMI.
- At possession, the sale deed is registered and the original goes to the bank until the loan is closed.
A worked example of a cancellation (illustrative only)
These are practice numbers, not a Reeva price. Say the home costs ₹70 lakh. You have paid ₹14 lakh of your own and the bank has paid ₹21 lakh to the builder. You then cancel, and your agreement says the builder may keep ₹2 lakh as a cancellation charge.
- Total paid to the builder: ₹14 lakh + ₹21 lakh = ₹35 lakh.
- Refund after the charge: ₹35 lakh − ₹2 lakh = ₹33 lakh.
- The bank is repaid first: ₹21 lakh, plus any interest still due on your loan account.
- You receive what is left: up to ₹12 lakh, before any interest owed to the bank.
Meanwhile, the pre-EMI you already paid is not returned, because it was interest on money you had borrowed. This is why the cancellation clause deserves a slow read before you sign anything.
Common mistakes first-time buyers make
- Signing without reading. It is short. Read every clause, especially refunds, delay and default.
- Assuming the bank will chase the builder for you. The bank protects its loan. Your remedies for delay come from RERA and your agreement for sale.
- Stopping EMI when the project slows. Missing payments hurts your credit report and can lead to penalties. Raise the delay with the builder and, if needed, with K-RERA instead.
- Not keeping copies. Keep the tripartite agreement, the agreement for sale, the sanction letter and every demand and receipt in one folder.
- Missing a clash between documents. If the payment schedule in the tripartite agreement differs from your agreement for sale, ask both parties to fix it in writing.
Questions to ask your bank, in writing
- Does this agreement include a buy-back or refund clause, and what does it say?
- If I cancel, how long will the refund take to reach my loan account?
- Which original documents will you hold, and when will I get them back after I close the loan?
- If the project is delayed, can I extend the pre-EMI period, and is there a cost?
- Can I prepay part of the loan during construction, and does that reduce my pre-EMI?
A bank officer will often answer these on the phone. Ask for the answer on email too. If you ever need to rely on it, a written answer carries far more weight than a remembered conversation.
When to bring in a lawyer
Most tripartite agreements follow the bank's standard format, and many buyers sign them without help. Ask a property lawyer to read it if the builder has added clauses of its own, if the refund or buy-back terms are unclear, or if the payment stages do not match your agreement for sale. A short review before you sign is cheaper and easier than a dispute later, and it gives you a clear picture of where your money goes if plans change.
A short checklist before you sign
- Agreement for sale registered and read
- Sanction letter conditions met
- Refund route on cancellation understood
- Delay and default clauses read
- Payment stages match across all documents
- RERA registration checked on the state website
If you are looking at Sarjapur–Attibele Road, you can ask us anything about The Shalott Marque. Call +91 91838 91839; price is on request.
