Tripartite agreement for a home loan on an under-construction flat

3.12.1 What is a tripartite agreement for a home loan?

A tripartite agreement is a contract with three parties. They are you as the buyer and borrower, the builder, and the bank that lends to you. It is used when the bank lends for a flat that is still under construction. At that stage, you have an agreement for sale with the builder, but no sale deed. The builder still holds the title to the flat. So the bank cannot yet take the flat in your name as its security. The tripartite agreement fills this gap until the sale deed is registered. RBI’s Credit Facilities Directions, 2025 name the document in paragraph 114. It says builder-linked schemes “might include signing of tripartite agreement between the bank, the builder and the buyer of the housing unit”. No law that Sachi checked prescribes a standard form. Ask your bank for its own draft, and read it before you sign.

Party	Role in the agreement
You (buyer and borrower)	Takes the loan and repays it, and holds the agreement for sale
Builder (promoter)	Holds the title until the sale deed, and receives the loan money
Bank (lender)	Pays the builder for you, and needs security for its loan

If you buy a ready flat with an OC, the sale deed can be registered at the start of the loan. Ask your lender whether it still needs a tripartite agreement in that case.

3.12.2 Why does the bank need a tripartite agreement for an under-construction flat?

The bank needs a tripartite agreement because, during construction, it pays money to the builder for a flat that you do not yet own. Under Section 17(1) of the RERA Act, 2016, the builder executes the registered conveyance deed in your favour later. If no local law sets a period, the deadline is three months from the date of the occupancy certificate (OC). Until then, the bank has your loan agreement and your agreement for sale, but no registered flat in your name. The builder’s land can also carry its own project loan. Section 11(4)(h) of the RERA Act protects you here. After the builder signs your agreement for sale, it must not mortgage or create a charge on your flat. If it does, the charge does not affect your rights. RBI paragraph 119 covers a bank that funds a project. The builder must name that bank in its brochures, and offer the mortgagee bank’s NOC for flat sales, if required.

Canara Bank’s housing loan page lists the documents it asks for when you buy a flat. The list includes an “NOC from Society/Association/Builder/Housing Board (Wherever applicable)”. It also lists an “NOC from Banker of Builder (wherever Project finance has been availed by the builder)”. Other banks can have different lists. Ask your lender for its own list in writing.

What the bank faces	What helps
The flat is not yet in your name	Tripartite agreement until the sale deed
The builder’s land carries a project loan	NOC from the builder’s bank for your flat
The builder mortgages your flat after your agreement for sale	RERA Act, Section 11(4)(h): the charge does not affect your rights

3.12.3 Which clauses must you read in a tripartite agreement?

Read the clauses that decide where the loan money goes, and who gets it back if the sale fails. Sachi did not find a tripartite format that a bank publishes on its own website. So this guide lists questions to ask, and does not say which clauses are common. Get the full draft from your bank before you sign. Read it together with your agreement for sale and your loan agreement. First, check which account of the builder receives the money. Under Section 4(2)(l)(D) of the RERA Act, the builder deposits 70 percent of the amounts it collects from buyers in a separate account. Second, check what the builder must refund, and to whom, if you or the builder cancel the booking. Third, check whether the builder gives an NOC or a release from its own lender. Fourth, check what the builder undertakes to do, such as to register the sale deed and hand over the title documents to the bank. Ask a lawyer to read the draft.

Question to ask	Why it matters
Which builder account receives the disbursal?	The RERA Act puts 70 percent of buyer money in a separate account (Section 4(2)(l)(D))
If the booking is cancelled, who gets the refund first, and how much?	The bank’s disbursal and your own payments can go to different people
Does the builder’s lender give an NOC for this flat?	The project loan can sit on the land
What does the builder undertake to do, and by when?	For example, register the sale deed and pass the title documents to the bank
What happens if the builder breaks the agreement?	Your own loan stays with you
When does the agreement end?	The bank’s security must move to the flat in your name after the sale deed

3.12.4 How does the bank release the loan to the builder?

For an under-construction flat, the bank releases the loan to the builder in stages, linked to construction. Paragraph 116 of the RBI (Commercial Banks - Credit Facilities) Directions, 2025 covers housing loans to individuals. Their disbursal “shall be closely linked to the stages of construction”. It also says that “upfront disbursal shall not be made” for incomplete, under-construction or green field housing projects. Paragraph 117 makes one exception. It covers projects sponsored by the government or a statutory authority with no past history of non-completion. Paragraph 115 explains the reason. Upfront lump-sum disbursal to builders exposes banks to “risks of diversion of funds”. Sachi read the version updated as on 1 October 2026. These directions apply to commercial banks. Sachi did not check the rules for housing finance companies. So, for each demand, the bank pays the builder the share that the stage justifies. The tripartite agreement and your loan agreement say how you ask the bank to pay.

1. Get the builder’s demand letter for the stage.
2. Check the stage against the payment schedule in your agreement for sale.
3. Send the demand to the bank with your request to disburse.
4. Keep the bank’s disbursal advice and the builder’s receipt for each payment.

The subvention scheme guide covers how to check a construction-linked demand on K-RERA. It also covers 20:80 and subvention offers. Read it before you agree to a scheme that defers your payments.

3.12.5 What happens to your loan if the builder delays or the project stops?

If the builder delays or the project stops, your loan continues, because you are the borrower. The bank lent the money to you, and the builder received it on your behalf. Sachi’s reading: your EMI or pre-EMI interest stays due under your loan agreement. Paragraph 115 of the RBI Credit Facilities Directions, 2025 names risks of loan schemes linked to builders. They include a dispute between the borrower and the builder, and “non-completion of the project on time”. Your rights against the builder come from the RERA Act. Section 18(1) applies if the builder fails to complete the flat or give possession by the date in your agreement for sale. It also applies if the builder stops its business as a developer, for example after its registration is suspended or revoked. You can withdraw and get back the amount the builder received, with interest and compensation. Or you can stay, and get interest for every month of delay. Sachi’s reading: that amount includes the money the bank paid the builder for you.

The tripartite agreement can decide where that refund goes. Ask, before you sign, whether a refund goes first to the bank to close your loan. Also ask what happens to the interest you already paid the bank. Section 19(4) gives you the same right to a refund with interest and compensation. The possession delay compensation guide explains how to claim it from K-RERA.

Event	Your loan	Your RERA right
Builder misses the possession date	You keep paying the bank	Withdraw with refund, interest and compensation, or stay with monthly interest (Section 18(1))
The builder stops its business, for example after its registration is revoked	You keep paying the bank	Refund with interest and compensation (Section 18(1)(b), Section 19(4))
You pay your own share late	Bank terms apply	You owe interest to the builder (Section 19(7))

Sachi reads K-RERA filings for Bangalore projects. To check a project’s registration and construction progress before you sign a tripartite agreement, Ask Sachi.