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Hello and welcome to assetyogi.com

This is Mukul and in this quick video, we'll learn about the allotment letter in real estate.

I'll also share some tips on how you can to certain clause details in the allotment letter

and avoid expensive mistakes.

So make sure that you watch the complete video.

Alright! let's get started.

Have you ever booked a flat or a plot or a shop or an office?

in an under-construction real estate project?

If yes then you must be familiar with the concept of an allotment letter.

And don't worry even if you've not booked an under-construction property so far,

I am going to give you complete context on the allotment letter in this video.

So by definition,

an allotment letter is a document

that details and confirms the property unit allotted to an applicant or allottee,

in an under-construction or under development real estate project.

For example, if you've allotted this flat B-201 in this hypothetical building,

then you would be given an allotment letter

for this particular property.

Similarly,

suppose you've booked a plot which is plot number 123 in the XYZ project.

Then you would be given an allotment letter for this plot number.

Now before we understand the allotment letter in more detail,

let us first understand the cycle of property booking and the transfer of cycle.

So as soon as you book a property,

you'll give some token amount to the builder.

token amount,

or it can be called the booking amount.

So for this, you'll be given a booking receipt by the developer.

booking receipt.

Then

he'll give you some time to pay some amount,

let's say 30 days to the 10% amount.

Then you'll be given an allotment letter.

Allotment letter.

That an XYZ property has been booked in your name.

Allotment letter

then after 60 days or 90 days

you'll be signing a builder-buyer agreement.

builder-buyer agreement.

Which will be much more detailed than the allotment letter.

So this will specify all the terms and conditions,

during the development or construction of the project.

then finally when you are offered a position

then you are going to sign a sale deed

or conveyance deed.

Now, this is the final document and this has to be registered.

registered at the registrar's office and you've to pay the stamp duty.

So this is the real document by which the title gets transferred.

This is

title entitlement document.

Now allotment letter or the builder-buyer agreement,

they are not title entitlement letters.

So there is no title

entitlement

that is transferred to you based on these letters, so this has to be very clear legally.

So what does the allotment letter signify?

The allotment letter is basically, a confirmation,

confirmation,

that you've booked a particular property.

And it acts as proof that you've booked that property so in case of any dispute

you can go to the court that you've booked a particular property,

with the developer and there are terms and conditions,

by which,

terms and conditions,

by which

both developer

and

applicant

are bound.

So it is a legally binding document but there is no title transfer because of this

allotment letter.

Now there is another reason why allotment letter is required?

Suppose you've to apply for a bank loan

then,

so all banks will ask

for the allotment letter before they can disburse the loan amount.

Disburse the loan amount.

So I think you understand the difference between an allotment letter, builder-buyer agreement,

and sale deed.

And why allotment letter is required?

Now let us see what all is contained in the allotment letter?

First of all, all details of the property will be contained in the allotment letter,

which means name and location of the project,

where exactly it is located?

Gurgaon

or XYZ sector of Gurgaon?

And what is the property name?

Basically the name of the project.

And then the unit number is basically the flat number,

or plot number or shop number.

Then what is the area of the unit?

Let's say it is a 3 BHK

then probably 1500 sq feet.

All this will be mentioned then there will be

the layout of the particular property which will be attached for example,

for our hypothetical property,

B-201, this is the layout which will be attached along with the allotment letter.

Then specifications of the property will also be mentioned whether,

RCC structure will be used for the walls or brick walls will be there?

Or whether you are going to get the modular kitchen?

modular kitchen.

And what kind of tiles will be used?

And what kind of electrical and sanitary fittings will be used?

They may mention the brands also.

Then the payment plan will also be mentioned in the allotment letter.

Broadly there are four kinds of payment plans

downpayment plan, a construction-linked plan, time linked plan, and a subvention scheme.

In a downpayment plan, you pay 10-20% upfront,

and balance

you've to pay the balance in 90 days.

So that is broadly your downpayment plan and in construction plan,

you'll pay 10-20% at the time of booking.

And balance is construction linked

balance

construction linked.

So

if the construction is 36 months,

So you'll be paying as per the time period assigned in the allotment letter,

construction period

and then 5-10% you'll be paying at the time of possession.

So similar to construction linked plan there is time linked plan in which,

you are going to pay 10-20% at the time of

booking,

plus balance will be time-bound.

It'll not be construction linked,

for example, you may be made to pay all the,

money in 24 months whereas,

construction may take 48 months also.

So I am not getting into much detail about payment plans in this video, I'll cover that in

a future video.

Then there is the popular,

scheme nowadays subvention scheme that you pay

30% upfront and balance 70% on possession.

So all these details will be mentioned in the allotment letter.

Then detailed terms and conditions will also be mentioned in the allotment letter which

will bind the developer as well as the applicant.

Then there will be a list of approvals and approved layout plans that

will be attached as part of the allotment letter.

Now these terms and conditions are very important a

nd you should be particularly careful when you are signing the dotted line.

And that is the whole reason of making this video

that you should be aware of all the clauses in the allotment letter.

So that you don't make mistakes.

So let us see what are the important clauses contained in the allotment letter?

An allotment letter clearly states that you've checked all project details,

layouts and the approvals,

or any government notification, zoning regulation, all circulars from the government.

So it is not the responsibility of the builder but it is your responsibility.

Then the allotment letter also specifies

that applicant is supposed to make

on-time payment

whether you choose a downpayment plan or construction linked plan or time-bound plan.

You are supposed to make all the payments on time otherwise,

you'll have to pay interest to the developer

and generally, they charged interest at the rate of 18% per anum

for any delays in the payments.

Then allotment letter also specifies that there should be no escalations on the basic sale price.

So if your allotment letter doesn't contain this clause you must

get it included from the developer.

Because you don't want to get your price increased after signing the allotment letter.

So you don't want to

don't want increase in prices, Right!

price

later on.

Then allotment letter will say you're supposed to pay all the taxes and government levies

and if it increases in future

you're supposed to bear that.

Bear any increase in tax

or any government levy.

For example, service tax was recently increased,

so you'll have to bear that risk

of increase in any taxes or levies.

Then the allotment letter will specify the earnest money clause which means,

which means 10-15% of the property cost

will be taken as earnest money

so in case if you cancel your property after signing the allotment letter,

then 10-15% of the amount will be forfeited.

forfeited

Then allotment letter also specifies that

applicant is agreeing to any alteration in layout

or area of the unit

or the unit number.

As we've discussed earlier that you don't get any title entitlement with the allotment letter.

So the allotment letter will clearly specify that

you don't get any title entitlement and the developer remains the owner.

Developer will remain the owner.

You can get your title entitlement from the owner once you sign the conveyance deed.

Or sale deed.

Not before that.

And this also has to be registered.

At the registrar's office.

Then allotment letter will also specify the time period for possession.

For example, he is going to say that he is going to deliver the project in 36 months.

plus

3 months grace period is taken generally.

grace period.

And if he doesn't deliver after this time,

then he is going to pay a penalty.

So the allotment letter will also specify the recourse in case of any delay or inability of the developer for offering possession.

So in case of delay as we've discussed he is going to pay a penalty.

The developer is going to pay a penalty.

For example, he can say he'll pay Rs. 5 per sq feet,

per month of delay.

Per month of delay.

And if he's not able to offer the possession for a particular reason

then he'll say he's going to refund the amount.

Plus he'll pay 6-9% interest per anum.

Then the allotment letter also specifies that you can transfer your booking or allotment,

without prior approval from the developer.

So he's going to collect some charges as well as you also need a written approval

written approval

from the developer.

from developer.

So you can not transfer your booking or allotment, you can not just sell it.

You've to take approval from the developer.

Then in case, you've booked a plot with the developer

then you'll be also given a time for the construction.

So you can not just sit on a plot you'll be given a time to construct your house.

So probably you'll be given four years to the construction and this may be

required by the government also.

So you'll have to construct your house during four years and if you do not construct within that time

the developer again can take back the plot and he can sell it again.

So that can also be specified in the allotment letter.

Then allotment letter may also specify that the developer can raise funds,

based on the receivables basically, the money he is going to get from you

over 2 or 3 years of construction.

Now another important thing to note here is this may not be part of the allotment letter,

but you should know once you signed the builder-buyer agreement,

which will be much more detailed than the allotment letter,

then this agreement will supersede all the terms and conditions of the allotment letter.

Now, why am I saying this?

Suppose the developer has promised to deliver the project in 36 months,

from the date of signing the allotment letter.

Alright!

Now if you sign the builder-buyer agreement,

after one from the allotment letter

then again the builder-buyer agreement will say

3 years from signing the builder-buyer agreement.

So you're going to lose one year and you cannot do anything about this.

So you've to be very careful when you're signing these documents.

I think you've understood what an allotment letter is?

and why it is required and what are the important clauses?

That you should be aware of in the allotment letter.

And I hope you can take better decisions now.

Thank you for watching this video.

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