Allotment letter: An important tool to buy a property 

September 13, 2022 . Real-Estate Industry . 10 min read

Do you consider looking for a suitable property the most challenging task? Undoubtedly it is a crucial step, but there’s more. Yes, we are talking about documentation. You must have all the property documents in place. Besides the title deed, sale agreement, commencement certificate, and other things, there is yet another essential document which is known as the allotment letter.

An allotment letter 

It is a crucial document concerning property purchases in India. 

When the builder receives the booking amount from the buyer, they issue this document to the first owner. Only the first owner possesses the right to the allotment letter, and other owners can seek copies of the original document from the seller. 

Significance of the letter of allotment 

This letter comes in handy if a buyer wishes to apply for a home loan. The reason is that the amount the buyer has to pay to the builder is mentioned in the letter. It also provides evidence when the builder fails to grant the promised facilities to the buyer. 

The Indian Contract Act mentions that a document is legally binding if it is enforceable under Section 10 and made by competent parties. Therefore, since the allotment letter contains all the essential contract features, it is legally binding. 

A builder cannot cancel a property booking unilaterally after issuing the allotment letter. However, they can send a notice to the buyer with the details of the refund of the booking amount. 

According to a new order of the Mumbai Bench of the Income Tax Appellate Tribunal (ITAT), an allotment letter from the builder is enough to act as proof of investment for availing of LTCG tax deductions after the sale of a property. This recent order benefits millions of taxpayers because they will no longer need to wait for the ‘Agreement to Sell’ document from the builder. 

Contents of the letter 

Here is the information that a letter contains: 

1. Delivery date 

2. Payment 

3. Significant facilities 

4. Construction terms 

5. Schedule of construction facilities 

6. Total due amount to the builder and the builder’s obligations if there is a delay 

Features of the letter

1. This letter includes data and facts related to the property. 

2. The letter is the only tool that can work as evidence of property transaction in case of an incomplete property. 

3. It states the architectural details, the building plans, specifics, and the sum paid to the contractor. 

4. The letter mentions the payable amount to the builder for the remaining amount to be financed by the bank. It may come in handy if you want to acquire a bank loan. 

Different types of allotment letters 

Different kinds of allotment letters depend on their origin, format, and style. They are listed as follows: 

Land Allotment Letter 

• You should write this document like a formal letter. You must date, sign, and stamp the document as an authorized individual. 

• It should contain the allotted shares and the due sum on the allotment. 
• Do not forget to include the due date and address of the allocation money payment. 
• You must also include the interest amount imposed on allotment funds after the deadline. 
• The letter will mention the possible consequences of failing to pay the allocation money. 
• The applied number of shares and the share application’s reference number should be included. 

Builder Allotment Letter 

• The builder issues an allotment letter when you make the flat’s initial payment. It serves as the cost of the initial reservation. 
• A customer can opt for a refund and cancel the agreement anytime if there is any such mention in the deed. 

Flat Allotment Letter 

• If you intend to book an under-construction property, you should receive a flat allotment letter from its builder. 
• This letter will contain features like flat payment alternatives and extra maintenance costs you need to pay. 

• The deed also includes a fixed construction schedule, delivery fate, various house plans, and the builder’s liability in the case of a flat delivery delay. 

Wrapping up 

An allotment letter is mandatory, but several individuals do not know the specific format. Are you also unaware of how to write a strong letter of allotment? Do not worry! You can now get your hands on allotment letters with a quick select and fill format on the Internet. So, resort to pre-written allotment letters to produce an enticing document.