This article has been written by Manisa Saha pursuing a Diploma in International Contract Negotiation, Drafting and Enforcement from LawSikho.

This article is edited and published by Shashwat Kaushik.


The real estate sector plays a pivotal role in our Indian economic sector by creating jobs and generating revenue. It is considered to be the second largest employment generating sector. In the early 1990s, this sector experienced various disruptions and was highly unorganised, due to which several disputes arose between buyers and developers. Recently, the Indian government has implemented the Real Estate (Regulation and Development) Act, 2016. Moreover, the introduction of the RERA Act has pushed the sector extensively and standardised the management and operations of real estate entities.

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Meaning of real estate contract

Real estate contracts are those that are legally enforceable and are binding upon two or more parties for the purpose of the sale, purchase, exchange or transfer of real estate. These contracts are indispensable for executing transactions related to real estate and are designed to provide protection to the parties. The main players of the real estate market includes buyers, sellers, vendors, tenants, developers, builders, landlords, real estate agents, etc.

Essential requirements of real estate contract

Real estate contracts can lead to several complications because many details are involved in each deal. Every real estate transaction requires a real estate contract. However, there are certain elements that must be present in the real estate contract to be valid. The contract will only be considered legally enforceable when the basic requirements of a real estate contract are fulfilled, which are as follows:

Offer and acceptance

There must be an offer and an acceptance and the contract must be in writing. In short,one party must make an offer by creating a written contract and handing it over to the other party. The other party can accept the offer by signing it.


Consideration, in simple terms, means something in return. It involves something of value that is exchanged between the parties to a contract. It can be in any form, such as money,property,service,performance or a promise to do something.

Legal capacity

Parties who are involved in the contract must be legally competent and must not be minors or mentally insane. Moreover, full name of the parties must be identified who are involved in the purchase of the property.

Legality of purpose

The contract must have a legal purpose. A contract will be considered void if it   contains any illegal activity.

Mutual assent

The contract must have mutual consent .i.e., there must be a meeting of minds by both parties. The character of the property must be clearly stated and the purchase price must also be included in the contract.


The signatures of all parties are necessary for the purchase and sale of the property to be legally enforceable.

What does the real estate contract include

A real estate contract includes the following things:

  1. Names of the parties who are involved in the contract, i.e., the full name and contact details of buyer and seller.
  2. Description of the property and other pertinent details about it.
  3. The purchase price of the property also includes any deposits or any additional costs associated with the transaction.
  4. Representations and warranties.
  5. Deadlines for completing inspections, surveys and loan applications.
  6. Earnest money security deposits must be made to show the buyer’s interest in purchasing the property.
  7. Closing date, which includes the exact date on which the title will be officially transferred and the date and time the buyer will receive the keys to the property.
  8. Details of title insurance, property taxes and other fees.

Laws that govern real estate

In India, there are multiple pieces of legislation that govern real estate. Some vital laws of real estate include:

The Indian Contract Act, 1872

The Indian Contract Act of 1872 is comprehensive legislation that governs the laws relating to contracts in India. It was enacted by the British colonial government in 1872 and has since been amended several times. The Act defines a contract as “an agreement enforceable by law.”

It sets out the essential elements of a valid contract, which include:

  • Offer and acceptance: There must be an offer by one party and an acceptance by the other.
  • Consideration: Each party must give something of value in exchange for the other party’s promise.
  • Intent to create legal relations: The parties must intend for their agreement to be legally binding.
  • Capacity to contract: Both parties must be legally competent to enter into a contract.
  • Legality of object and consideration: The object of the contract and the consideration must be lawful.
  • Free consent: The parties must consent to the contract freely and without duress or undue influence.

The Act also sets out the remedies available to parties who breach a contract. These remedies include:

  • Damages: The injured party may be awarded damages to compensate them for their losses.
  • Specific performance: The court may order the breaching party to perform their obligations under the contract.
  • Rescission: The injured party may cancel the contract and recover any money or property they have given to the breaching party.

The Indian Contract Act is a complex and comprehensive piece of legislation. It is important to consult with an attorney if you are considering entering into a contract or if you believe that a contract has been breached.

The Transfer of Property Act, 1882

Any transfer of property in India is regulated by the Transfer of Property Act. This Act is a central law and provides the laws regarding the ownership of movable and immovable property, which include the sale, mortgage, lease, exchange and gift of property. Even though it includes provisions for the performance of the contract.

The TPA is a comprehensive law that provides a framework for the transfer of property in India. It is a valuable resource for anyone who is involved in a property transaction, as it can help to ensure that the transaction is conducted in a fair and legal manner.

Some of the key provisions of the TPA include:

  • The definition of property, which includes both movable and immovable property.
  • The different types of transfers that are covered by the TPA, such as sales, mortgages, leases, exchanges, and gifts.
  • The requirements for a valid transfer, such as the consent of all parties involved and the payment of consideration.
  • The rights and obligations of the parties to a transfer, such as the right to possession and the obligation to pay rent.
  • The remedies available to parties who have been wronged in a property transaction, such as damages and injunctions.

The TPA is a complex law, and there are many nuances that can be difficult to understand. If you are involved in a property transaction, it is important to consult with an experienced real estate lawyer to ensure that you understand your rights and obligations under the law.

The Registration Act, 1908

This Act deals with the registration of documents in India. It is mandatory to register the real estate contract so as to make it legally valid and enforceable. The aim of this Act is to conserve the evidence, title, assurances, publishing of documents and prohibition of fraud. It lays down the provisions and formalities that are prerequisites to the registration of an instrument. The Act accomplishes these goals by requiring that certain documents be registered with the Registrar of Assurances in the district where the land is located. The registrar is responsible for maintaining a register of all registered documents and for providing copies of registered documents to the public.

The Registration Act lays down a number of provisions and formalities that are prerequisites to the registration of an instrument. These include:

  • The instrument must be in writing.
  • The instrument must be signed by all parties to the transaction.
  • The instrument must be attested by at least one witness.
  • The instrument must be stamped with the appropriate stamp duty.
  • The instrument must be delivered to the registrar for registration.

The registrar will examine the instrument to ensure that it meets all of the requirements of the Act. If the instrument is in order, the registrar will register it and issue a certificate of registration. The certificate of registration is prima facie evidence of the validity of the instrument and of the title to the land.

The Registration Act is an important piece of legislation that protects the rights of landowners and helps to prevent fraud. It is essential that all real estate transactions be properly registered in accordance with the Act.

The Indian Stamp Act, 1899

This Act deals with the payment of stamp duty on various documents. All real estate contracts must be properly stamped and the stamp duty must be paid within a specified time as instructed by the state government. If anyone fails to pay the stamp duty within a reasonable time, then that person will be entitled to compensation.

The Indian Easement Act, 1882

The Indian Easements Act of 1882 is a law that governs the rights and obligations of landowners and easement holders. An easement is a right to use someone else’s land for a specific purpose, such as access, drainage, or support. The Act defines easements and sets out the rules for how they can be created, transferred, and terminated.

The Act applies to all easements in India, except for those that are created by statute or by implication of law. Easements can be created by express grant, by implication, or by prescription. An express grant is a written agreement between the landowner and the easement holder. An easement by implication arises when the landowner creates a situation that makes it necessary for someone else to use their land in order to enjoy their own land. An easement by prescription arises when someone uses someone else’s land for a certain period of time (usually 20 years) without the landowner’s permission.

Once an easement is created, it is binding on both the landowner and the easement holder. The landowner must allow the easement holder to use their land for the purpose specified in the easement. The easement holder must use the land in a reasonable manner and must not interfere with the landowner’s use of their land.

The Act also sets out the rules for how easements can be transferred. An easement can be transferred with the land, or it can be transferred separately. If an easement is transferred separately, the new owner of the easement will have the same rights and obligations as the original easement holder.

Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013

This Act provides compensation to land owners whose land has been acquired by the government for public purposes.The Land Acquisition Act of 2013 is landmark legislation that provides fair and equitable compensation to landowners whose land is acquired by the government for public purposes. The Act also sets out a transparent and efficient process for land acquisition and provides for safeguards to protect the interests of landowners.

The Act defines “public purpose” broadly to include a wide range of activities, such as the construction of roads, bridges, dams, airports, and other infrastructure projects. The Act also provides for the acquisition of land for private companies, but only if the land is required for a project that is in the public interest.

The Act sets out a two-step process for land acquisition. In the first step, the government must notify the landowner of its intention to acquire the land. The landowner is then given an opportunity to object to the acquisition. If the landowner does not object, or if the objection is overruled, the government may proceed to the second step of the process.

In the second step, the government must make an offer of compensation to the landowner. The compensation must be based on the market value of the land and must include an amount for the landowner’s disturbance and relocation costs. The landowner has the right to accept or reject the offer of compensation. If the landowner rejects the offer, the government may acquire the land through the courts.

The Act provides for a number of safeguards to protect the interests of landowners. These safeguards include:

  • A right to appeal to the courts if the landowner is dissatisfied with the compensation offered by the government.
  • A right to receive compensation for the landowner’s disturbance and relocation costs.
  • A right to be consulted about the proposed acquisition.
  • A right to be given a fair price for the land.

The Land Acquisition Act of 2013 is a significant improvement over the previous law, which was widely criticised for being unfair and arbitrary. The new Act provides for a more transparent and equitable process for land acquisition, and it protects the interests of landowners.

The Real Estate (Regulation and Development Act, 2016)

This Act has brought about substantial reforms in the Indian real estate sector and has taken care of the marketing , sale and development of real estate projects. Its objective is to ensure transparency and fairness in residential real estate transactions. Under this Act, the developers are obliged to refrain from selling all the real estate properties. Moreover, this Act also safeguards the interests of the buyers by providing them with accurate information regarding the project’s status, progress and completion timelines. Since its implementation, the Act has increased transparency and accountability in the real estate sector. Besides that, this Act has mitigated the chances of project delays and made this sector more systematic and professional.

The Foreign Exchange Management Act, 1999

The Foreign Exchange Management Act (FEMA) was introduced in 1999 to regulate the flow of foreign exchange in and out of India. The act was amended in 2015 to include provisions for non-residents of India who want to purchase land in the country.

Under the FEMA, non-residents of India are required to obtain prior permission from the Reserve Bank of India (RBI) before they can purchase land in the country. The RBI will consider the following factors when granting permission:

  • The purpose of the purchase
  • The source of funds
  • The impact of the purchase on the Indian economy

If the RBI grants permission, the non-resident of India will be required to deposit the full amount of the purchase price in an Indian bank account. The land can only be purchased after the funds have been cleared in the bank account.

The FEMA also imposes certain restrictions on the transfer of land by non-residents of India. For example, non-residents of India are not allowed to sell land to other non-residents of India. They can only sell land to residents of India.

The FEMA is a complex piece of legislation, and it is important for non-residents of India who are considering purchasing land in the country to seek legal advice before they proceed.

Importance of contracts in real estate

There are various real estate contracts and it is important to understand that contracts play a crucial role in facilitating transactions and ensuring a smoother transaction process by clearly stating the terms, expectations and potential contingencies. A contract outlines the buyer and seller’s expectations by providing clarity and protection, helping them to minimise disputes, and establishing a framework for a successful transaction. The importance of contracts in real estate transactions is mentioned below:

  • The contract must clearly state the identification of the parties involved. By stating the identification and roles of each party, the contract ensures that all the parties involved will understand their responsibilities and obligations.
  • By clearly stating the details regarding the property, the contract eliminates confusion or misunderstanding about specific assets under consideration. 
  • The contract must clearly state the purchase price and payment terms. By specifying the said details, the contract ensures that both parties are on the same page regarding the financial aspects of the transaction.
  • More frequently, real estate transactions include contingencies and conditions, such as inspections, obtaining financing or the sale of an existing property. The contract outlines these contingencies and sets deadlines for their completion. If any of these contingencies are not satisfied, then the contract will terminate without penalty.
  • The contract clearly states the responsibilities of the parties and by doing so, both parties fulfil their obligations properly, reducing the risk of disputes.
  • By addressing legal and title issues, a contract provides a framework to resolve potential conflicts and protects the interests of the parties involved.
  • The contract provides the procedure and timeline for closing real estate transactions and this enables the parties  to become aware of the necessary steps to complete the transaction.
  • A contract helps to enforce legal remedies by protecting the rights of both buyer and seller and providing means to seek redress in case of non-compliance.

Thus, it can be said that a contract is an integral part of the real estate transaction as it provides protection to both buyer and seller by ensuring that both parties have mutual understanding and has minimised the risk of misunderstandings and disagreements.


The real estate industry’s remarkable contribution to the Indian economy has facilitated a lot. It has been recognised as the economic growth engine of the country. Various developments and elevations in the real estate sector have been noticed with the introduction of several laws and regulations. In order to avoid any dispute in the future, all parties involved in the real estate contract must understand the legal aspects of the contract and comply with the relevant laws and regulations. This will help promote transparency and accountability and ensure sustainable growth and development in the sector. 



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