What payment terms are standard in commercial land sales?

Payment terms in commercial land sales define the schedule, mode, and conditions under which the buyer pays the seller. These terms are designed to ensure security, legal compliance, and transaction transparency while addressing the interests of both parties. Though negotiable, certain patterns are widely accepted as industry standards across commercial real estate deals.

1. Initial Token or Booking Advance

• A nominal amount (typically 1% to 5% of the agreed sale value) is paid upfront to reserve the property.
  
• This signals buyer intent and locks in the price for a short period.
  
• A basic Letter of Intent (LOI) or expression of interest may be signed at this stage.
  

2. Agreement to Sell and Advance Payment

• Once legal due diligence begins, parties enter into a registered Agreement to Sell.
  
• The buyer typically pays an advance of 10% to 30% of the total sale consideration.
  
• This agreement includes:
  
  • Payment schedule
    
  • Timelines for registration
    
  • Obligations of both parties
    
  • Clause for forfeiture or penalty on breach
    

3. Stage-Wise or Milestone-Based Payments

• In large commercial transactions, payments may be linked to:
  
  • Title verification clearance
    
  • Zoning or conversion approval
    
  • Encumbrance certificate delivery
    
  • Possession handover readiness
    
• These stages reduce buyer risk and ensure seller accountability before full disbursement.
  

4. Final Payment at Registration

• The remaining balance (typically 70% to 90%) is paid on or just before the execution and registration of the sale deed.
  
• Full payment must be made via bank transfer, demand draft, or banker’s cheque, with proof submitted to the Sub-Registrar’s Office.
  

5. Escrow or Third-Party Holding Arrangements

• In high-value or institutional deals, funds may be routed through an escrow account, where release is conditional on:
  
  • Legal clearance
    
  • Documentation completion
    
  • Authority approvals
    
• Escrow adds a layer of protection for both parties.
  

6. TDS Deduction Compliance

• If the sale value exceeds ₹50 lakh, the buyer is responsible for deducting 1% TDS under Section 194-IA and depositing it with the government.
  
• The net amount after TDS is transferred to the seller, and Form 16B is issued as proof.
  

7. Time Frame for Completion

• Standard commercial sale agreements provide for a 30 to 90-day window between agreement and registration.
  
• This period may be extended with mutual consent, especially in case of:
  
  • Loan approvals
    
  • Document processing
    
  • Government clearances
    

8. Penalty or Interest Clauses

• Agreements may include clauses for:
  
  • Interest on delayed payments by the buyer
    
  • Forfeiture of token or advance in case of cancellation
    
  • Compensation for delayed possession or non-registration by the seller
    

9. Rebate for Early or Lump-Sum Payment

• Some sellers offer discounts (1% to 3%) for faster payment schedules or full upfront disbursal.
  
• This is more common in distress sales or urgent liquidation scenarios.
  

10. Customized Terms in Developer or Institutional Sales

• When purchasing from developers or government bodies, payment may follow:
  
  • Installment-based plans
    
  • EMI structures (pre-possession)
    
  • Deferred payment linked to usage or construction milestones