Intellectual Property Rights: Practice and Drafting by Adv Gautam Matani. Register Now!
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Shlok (Manager)     29 October 2009

Flat Purchase Agreement

Dear Experts, please help.

I have a question regarding flat purchase agreement. Below is the clause, where Promoter is the builder, claims money:

"It is specifically agreed that the consideration is arrived at and is confirmed on the basis of the cost of material components & labour costs calculated and based  on the District Schedule of Rate Index as on the date of this Agreement.  In case of escalation in these over and above 5% at the time of possession,  the  agreed consideration shall be subject to proportionately increased. The Promoter shall be entitled to claim, demand and recover  such increase from the Purchaser/s before delivery of possession of the Said Flat and the Purchaser/s hereby agree/s to pay such amount forthwith on demand. The Certificate of Architect for this project in this regard shall be conclusive  proof for justifying the increase demanded by the Promoter. " 

Is this normal? To me something looks fishy here! The building is under construction and posession will be after 1.5 years.


 5 Replies

Raj Kumar Makkad (Adv P & H High Court Chandigarh)     29 October 2009

Why you become agree over this term at the time of execution of the agreement. Everyone knows that prices of the labour shall increase at the time of delievery of possession but getting the cost of house increase at time means arbitrariness then why not to issue possession at this time? Cost is calculated keeping in view future escalation of all factors so developer has put this terms for his own benefit but where are the purchasers sleeping? why dont they make hue and cry not to acept this term before executing the agreement????

1 Like

Shlok (Manager)     29 October 2009

Dear Mr. Makkad,

I am very grateful for your instant reply. Probably I was not clear above, I have not yet "signed" this agreement and still reviewing it. There are many clauses that seem quite biased to me. This one is foremost amongst others. And yes, I will make "hue & cry" before executing the agreement.

Infact, I not being an expert in law, would greatly appreciate if someone can review the whole agreement and revert back to me, as regards to what clauses are unduly biased towards the builder. I am even ready to compensate for this help....

Raj Kumar Makkad (Adv P & H High Court Chandigarh)     31 October 2009

shlok! you may contact me at my cell no. 09416058227


 iagree with mr. makkad. this is  price escalation clause . price may increase  at the time of possession. you do not agree  for this clause.

Siddhartha Ghosh (Sr. Engineer)     14 March 2013

I am into similar case. Is there any indian law/constitution to put ceiling limit on escalation cost asked by builder during possesion? Or they can ask any amount, let's say double of total cost of property.

Can builder be so unrealistic?

If they, I hope we can file a case against them, and they can't forfeit earnest amount till case is resolved.

Can they dominate like this?

I would have come out of it, but I have already paid 20%, and builder is not refunding it back. Resale is also not opened. My money is trapped in one way or another.

Lastly, no one else is raising their voice against this.

Please let me know any related cases and judgment.

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