In real estate transactions, the Agreement for Sale (AFS) is the foundational legal document that governs project timelines, payment obligations, and remedies available to both buyers and developers. Despite increased regulatory oversight under RERA and tighter scrutiny in 2026, poorly drafted Agreements for Sale remain one of the leading causes of project delays, stalled registrations, and prolonged litigation.
Many disputes that surface years after project launch can be traced back to vague clauses, missing safeguards, or imbalanced drafting at the AFS stage. This article explains the most common drafting pitfalls that delay projects, why they matter in 2026, and how they can be corrected through better contract structuring.
Why the Agreement for Sale Matters More Than Ever in 2026
In practice, courts and tribunals increasingly rely on the specific wording of the Agreement for Sale when deciding disputes related to possession delays, refunds, and compensation. Legal experts note that in many cases, the possession date stated in the AFS takes precedence over general timelines mentioned in RERA registrations, particularly when buyer remedies are being determined.
As a result, even minor drafting lapses can have outsized consequences—affecting project cash flows, lender confidence, and completion timelines. Understanding Reserve Bank of India’s guidelines on housing finance also becomes crucial for developers seeking construction funding.
1. Vague Possession and Completion Timelines
The Pitfall
Agreements often use non-committal language such as:
- “Expected completion”
- “Subject to availability”
- “Tentatively by”
These phrases avoid binding the developer to a fixed date, creating uncertainty for home loan applicants and investors alike.
The Delay
Such wording grants excessive flexibility, enabling projects to be delayed indefinitely without triggering buyer remedies. In 2026, legal practitioners emphasize that when disputes arise, courts primarily examine the AFS date—not marketing brochures or informal assurances.
The Solution
The Agreement for Sale should clearly:
- Specify a fixed possession date aligned with construction finance disbursement schedules
- Link possession to physical handover of keys, not merely issuance of an Occupancy Certificate (OC)
- Define grace periods, if any, with a hard stop
Clear timelines reduce ambiguity and strengthen enforceability under RERA regulations.
2. Ambiguous Payment Milestones
The Pitfall
Many AFS documents refer to generic payment triggers such as “stage-wise payment” without defining the stage, impacting working capital management for developers.
The Delay
Ambiguity leads to disputes over whether a milestone has been achieved. Developers face cash flow disruptions, while buyers may withhold payments, claiming milestones are incomplete. This affects the developer’s credit score and future borrowing capacity.
The Solution
A robust AFS should:
- Define verifiable construction milestones (e.g., “completion of RCC up to 5th floor”)
- Assign exact ₹ amounts to each milestone
- Specify how and when payment notices will be communicated
This alignment protects both cash flow continuity and buyer confidence, similar to how machinery loan disbursements are structured against verifiable procurement stages.
3. Missing or Weak Penalty Clauses
The Pitfall
Agreements frequently include strict penalties for buyer defaults (late payments) but omit reciprocal penalties for developer delays, creating an imbalanced loan agreement structure.
The Delay
Without financial consequences, developers may reallocate resources to other projects, leaving current ones stalled. This affects their CIBIL MSME Rank and creditworthiness.
The Solution
Balanced drafting requires:
- Reciprocal penalty clauses
- Clear compensation rates for delayed possession
- Clauses mandating refund of token amounts with an equivalent penalty if the seller backs out
Such provisions incentivize timely performance and align with National Housing Bank (NHB) guidelines for fair lending practices.
4. Broad or Undefined Force Majeure Clauses
The Pitfall
Generic “Act of God” clauses often lack precise definitions or time limits, leaving construction finance lenders uncertain about project viability.
The Delay
This allows parties to invoke force majeure for routine regulatory or administrative delays, effectively freezing obligations and impacting Company Credit Reports (CCR).
The Solution
A well-drafted clause should:
- Clearly define qualifying force majeure events
- Exclude foreseeable regulatory delays
- Set a maximum suspension period, after which termination rights arise
Precision prevents misuse and maintains compliance with West Bengal RERA guidelines.
5. Inadequate Due Diligence and Property Descriptions
The Pitfall
Agreements sometimes omit critical property details such as:
- Survey or CTS numbers
- Exact carpet area
- Boundary demarcations
This creates issues similar to incomplete loan documentation that delays approvals.
The Delay
Inaccurate or incomplete descriptions can trigger legal challenges, stay orders, or prevent final Sale Deed registration, affecting the developer’s DSA partner network and reputation.
The Solution
Best practices include:
- Attaching a City Survey (CTS) plan
- Verifying property card history
- Cross-checking measurements with sanctioned plans
Thorough due diligence reduces downstream risk and aligns with RBI’s housing finance directives.
6. Poorly Structured Dispute Resolution Mechanisms
The Pitfall
Many AFS documents default directly to litigation without alternative dispute resolution steps, similar to unstructured business loan agreements.
The Delay
Litigation timelines in 2026 remain lengthy, often stretching into years, impacting credit eligibility and project financing.
The Solution
Effective agreements should:
- Mandate mediation as a first step
- Provide for arbitration with defined jurisdiction
- Specify timelines for dispute escalation
Structured resolution can settle disputes in months rather than years, protecting the developer’s CMR ranking.
Why Poor Drafting Impacts Project Financing and Execution
Lenders and investors increasingly scrutinize the Agreement for Sale during due diligence. Vague clauses increase perceived project risk, potentially leading to:
- Delayed loan disbursements
- Higher financing costs
- Stricter covenants
Clear, balanced drafting supports smoother project execution and funding continuity, whether through cash credit facilities or term loans from banks adhering to RBI’s Master Circular on Housing Finance.
Best Practices for Agreement for Sale Drafting in 2026
- Avoid generic templates
- Align AFS terms with RERA disclosures
- Ensure reciprocity in obligations and penalties
- Engage legal review before launch
- Maintain updated company credit reports for transparency
Resources such as The Art of Contract Drafting (2026 Edition) offer structured guidance on modern contract standards compliant with Haryana RERA and other state regulations.
Frequently Asked Questions (FAQs)
What is an Agreement for Sale in real estate?
An Agreement for Sale is a legally binding document that outlines the terms under which a property will be sold, including timelines, payments, and obligations. It’s crucial for construction financing and mortgage arrangements.
Can vague possession clauses delay projects?
Yes. Non-committal language allows indefinite delays without triggering buyer remedies, affecting your credit profile and future funding access.
Does the Agreement for Sale override RERA timelines?
In disputes, courts often prioritize the possession date mentioned in the AFS when determining remedies, as per RERA Act provisions.
Why are penalty clauses important in an AFS?
They create financial consequences for delays, incentivizing timely performance by both parties and protecting MSME rankings.
How can dispute resolution clauses reduce delays?
Mandatory mediation and arbitration can resolve disputes faster than traditional litigation, preserving business relationships and creditworthiness.
Final Takeaway
In 2026, Agreement for Sale drafting quality directly impacts project timelines, buyer remedies, and financing outcomes. Addressing common pitfalls at the drafting stage is far more effective than resolving disputes years later.
Carefully structured AFS documents are not just legal formalities—they are essential tools for timely and successful project delivery, ensuring compliance with RBI guidelines and state RERA authorities.
For expert assistance with construction finance, business loans, or improving your company credit report, contact CreditCares today!
