Tripartite Agreements: The Hidden Safeguard in Home Buying

If you’re buying a home that’s still being built and taking a loan for it, you’ll likely come across something called a Tripartite Agreement. It’s a legal document signed by three parties — the Builder, the Bank, and You (the Buyer).

Let’s break it down in simple terms:

Why This Agreement Exists

The purpose of the Tripartite Agreement is to protect all three parties – Bank, builder, borrower.. Since the home is still under construction and not officially yours yet, the Bank wants to make sure their money is safe if something goes wrong — like if you stop paying the loan.

This agreement ensures that:

• The Builder agrees to help the Bank recover its money if you default.
• The Bank has a legal hold (lien) on the property until the full loan is paid off.

The Role of Your Downpayment

When you sign the Agreement to Sell, you’ll pay a downpayment to the Builder. This isn’t just to reserve your flat — it’s also like a backup fund. If you miss your EMIs or something unexpected happens, the Builder can use this money to help cover what you owe the Bank.

Once you’ve finished paying the loan, the Bank removes its hold, and the ownership officially becomes yours. By then, your flat might even be worth more!

Who’s Responsible for What?

Builder

• Must register the flat in your name after you pay everything and once all legal documents (like e-Katha) are in place.
• Doesn’t face much risk because they still legally own the flat and already have your downpayment.

Bank

• If you stop paying or cancel the deal:
  • The Builder gives the Bank back the amount the Bank had paid.
  • Any extra charges (like interest) are taken from your downpayment.
  • The Bank can’t ask for more than it paid.

Can You Change the Terms?

Most of the time, Banks don’t allow edits to their standard Tripartite Agreements. But if something in the agreement looks unfair — like the Builder being made responsible for extra interest — you can try negotiating. Just know this isn’t common.

Key Takeaways

• Your down payment acts like a safety net for both the Builder and the Bank.
• The Bank only gets back what it gave — no more, no less.
• The Builder isn’t responsible for paying extra money unless your down payment covers it.
• After full loan repayment, the home becomes legally yours.

Final Thought

This agreement is all about managing risk and making sure everyone’s money is protected while the home is still being built. As a buyer, it’s good to understand how the process works — so you can make smart choices and avoid surprises.