When is advance payment due?

Advance payment in a property transaction refers to the initial portion of the total sale consideration paid by the buyer to the seller, usually as a commitment to proceed with the deal. Its timing is typically linked to the execution of key agreements and initiation of due diligence or legal processing, depending on the type and scale of the transaction.

1. At the Time of Agreement to Sell

• In standard commercial land deals, the advance payment is typically made at the time of executing the Agreement to Sell.
  
• This amount usually ranges from 10% to 30% of the total sale value, and:
  
  • Confirms buyer intent
    
  • Binds the seller from entertaining other offers
    
  • Triggers further documentation, legal checks, or planning approvals
    

2. After Token Booking or Letter of Intent (LOI)

• In some cases, a smaller amount (1% to 5%) is paid earlier as token advance, often at the time of signing an LOI or term sheet.
  
• The formal advance is then paid after legal verification or upon mutual acceptance of key commercial terms.
  

3. Upon Satisfactory Completion of Preliminary Due Diligence

• Buyers may withhold advance payment until:
  
  • Initial title checks, encumbrance certificate, and zoning confirmations are completed
    
  • Landowner proves readiness to execute the sale through documentation
    
• In such cases, advance payment is made just before or immediately after the agreement is signed.
  

4. As Per Negotiated Terms Between Buyer and Seller

• In customized transactions, the advance may be linked to:
  
  • Buyer securing internal board approval or loan sanction
    
  • Seller clearing pending approvals or litigation
    
  • A specific calendar date agreed mutually in writing
    

5. Before Registration Slot Booking (in Fast-Track Deals)

• In time-sensitive or direct deals, advance payment may be made shortly before the execution of the sale deed and registration.
  
• The buyer may consolidate the advance with the final payment under a single full payment mode, especially in cash-neutral institutional purchases.
  

6. With Safeguards Like Escrow or Conditional Release

• In high-value transactions, the advance may be held in an escrow account, released only upon:
  
  • Fulfillment of preconditions (e.g., land mutation, NOC, layout clearance)
    
  • Confirmation from both parties or their legal counsel
    

7. Documented via Agreement Clauses

• The advance payment terms must be clearly mentioned in the Agreement to Sell, including:
  
  • Exact amount and date
    
  • Mode of payment (bank transfer, cheque, etc.)
    
  • Penalty clause or forfeiture condition (in case of buyer default)
    
  • Refund clause (in case of seller withdrawal or legal failure)