Buying an Under-Construction Property? Know the Tripartite Agreement

When I first applied for a home loan to buy an under-construction flat, I thought I was prepared. I had the builder's documents, my income proofs, and even the legal paperwork in place, or so I believed. Then came a request from the bank I hadn't expected: “Please submit the Tripartite Agreement.”

At first, I had no idea what it meant.
Why was this document important?
Did it mean I wasn’t the full owner yet?
And what if the builder refused to sign it?

I had all these questions. And if you’re planning to buy an under-construction property with a loan, chances are, you do too. In 2025, after going through the home loan process myself, reviewing legal paperwork, coordinating between the bank and builder, and finally signing the tripartite agreement, I learned exactly how it works and why it matters.

In this article, I’ll break down everything you need to know about a Tripartite Agreement what it is, when you need it, how it protects you, and what to check before signing it. Whether you’re applying for a loan or just planning, this guide will make it easier to navigate the legal side of buying a home.

What Exactly Is a Tripartite Agreement?

A Tripartite Agreement is a three-way legal document between the buyer (that’s you), the builder, and the bank. It’s mandatory when you take a home loan for a property that hasn’t been completed yet.

Why? Because in an under-construction project, the builder still legally owns the property. So, before the bank gives you the loan, they need the builder’s formal consent to mortgage the property, even though it's being built for you.

Without this agreement, no reputed bank will release a single rupee. And honestly, I now understand why it protects all three parties in the transaction.

Also Read: Indian Succession Act, 1925: Understanding Inheritance and Property Laws

Why Is the Tripartite Agreement So Important?

At first, I thought this was just another piece of paperwork. But once I read the fine print, I realised how important it really is.

Here’s what it does:

• It protects your home loan: The bank won’t disburse the loan unless the builder confirms they have a clear title to the land and are legally constructing the project.
• It binds the builder to deliver: The builder promises to complete the project on time and hand over possession once you’ve paid everything.
• It legally secures your interest: In case there are delays, defaults, or disputes, this agreement gives you (and the bank) a legal fallback.

In my case, I found it reassuring because once signed, everyone was legally accountable for their role.

What Clauses Should You Watch Out For?

When I finally got a copy of the Tripartite Agreement, it was full of legal jargon. But some terms stood out, and I made sure to understand them fully before signing.

Here are a few critical ones:

• Possession Timeline: Make sure there’s a clear deadline for when the builder will give you the keys.
• Loan Disbursal Terms: The bank typically releases the loan in phases as construction progresses.
• Default Clause: What happens if the builder delays or if you can’t pay EMIs?
• Mortgage Consent: The builder officially allows the bank to mortgage the property.
• No Objection Clause: The builder agrees not to oppose the loan terms.

I had my lawyer glance through it as well just to be safe. And I’m glad I did.

When Do You Need a Tripartite Agreement?

Not every home loan borrower needs this document. I didn’t need one when I bought a ready-to-move flat later. But here’s when it’s essential:

• The property is still under construction.
• The builder holds the legal title to the property.
• You’re taking a home loan before possession.
• The builder agrees to the bank's mortgage rights over the flat.

If the property has an Occupancy Certificate and is fully complete, your loan process can skip this agreement.

What’s Included in a Standard Tripartite Agreement?

Although formats differ slightly from one bank to another, my agreement included these core sections:

• Parties and Definitions: It clearly stated who the buyer, builder, and lender were.
• Loan Details: Loan amount, interest rate, disbursement method everything was mentioned.
• Project Timeline: Construction milestones and expected handover dates.
• Responsibilities: What each party was legally required to do.
• Dispute Resolution: If anything went wrong, we’d go through arbitration before court.

I strongly recommend reading every section, especially the fine print related to penalties and exit clauses.

How Can You Be Sure the Agreement Is Fair?

This was one of my biggest concerns: Was the Tripartite Agreement biased in favour of the builder or the bank?

So, here’s what I did (and what you should too):

• Verified the builder’s legal ownership: I checked if the land title and permissions were in place.
• Checked timelines: There was a fixed delivery date and a penalty if they missed it.
• Looked at EMI terms: My EMI would start only after disbursement, not before.
• Read the penalty and default clauses: To see who pays what in case of delays or missed payments.
• Reviewed the exit clause: I wanted to know how I could cancel the deal if required.

If anything looks off, don’t hesitate to show the agreement to a lawyer. A second opinion can save you from long-term legal trouble.

Can You Negotiate the Tripartite Agreement?

Honestly, most banks and builders follow a standard format. It helps them avoid complications.

But in my case, I did manage to negotiate a few things:

• I requested a grace period for possession just in case the bank delayed disbursal.
• I asked for flexibility in construction-linked payment terms, which the builder accepted.

That said, don’t expect major customisations. It’s a legal document involving three parties, so changes can be tricky.

Tripartite Agreement vs Builder-Buyer Agreement

At one point, I confused this with the builder-buyer agreement. But they are different, and both are important.

When I booked my flat, I signed the builder-buyer agreement first. The Tripartite Agreement came later, once my loan was approved.

Also Read: Understanding Index 2 Document in Property Registration: Format, Uses, and Retrieval

What If There’s No Tripartite Agreement?

If you skip this agreement or the builder refuses to sign it things can get messy:

• Your bank might reject your loan outright.
• The builder could change timelines or terms without consequences.
• You won’t have any legal backup if there are disputes or delays.
• Worst of all, you could be paying EMIs for a home that never gets completed.

It’s just not worth the risk. Make sure your Tripartite Agreement is in place before moving forward.

Final Thoughts

Looking back, I’m glad I paid attention to the Tripartite Agreement process. At first, it felt like just another bureaucratic hurdle. But it turned out to be one of the most important legal documents in my home-buying journey.

If you’re planning to buy an under-construction property with a loan, don’t ignore this step. Read the agreement. Ask questions. Get legal help if needed.

Because buying a home is a big milestone and protecting it starts with understanding your paperwork.