Everything You Need To Know About Tripartite Agreement

May 30, 2022 . Home Buyer's Guide . 10 min read

Tripartite as the name suggested is an agreement involving three parties. Generally, only two parties are involved in an agreement. However, certain cases mandate the presence of a third party. In the case of homebuyers who purchase a house using a home loan, a tripartite agreement can be made.

The three parties involved are the seller, the buyer, and the financial institution providing the funds. This legally binding document amongst the parties is called the tripartite agreement. Such documents are extremely important to protect the interest of the buyers, especially in the case of under-construction houses. The agreement also reaffirms the transfer of the property to the financial institution in case of default from the buyer’s side.

What does the tripartite agreement state?

  • Three parties are referred to in this legal document: the borrower, lender, and developer.
  • The developer is the one in charge of constructing the building as per the specifications, approval, and map as it was in the agreement.
  • For the duration of the agreement, the developer is not allowed to enter into the same agreement.
  • The developer should have a clear claim and title over the land.
  • Various information like the sale proof, phases of construction, EMIs, interest rates, and many more. 

How does it work?

Tripartite agreements are established to protect the rights of the buyers by having a powerful institution like a bank act as an arbitrator in case of a dispute. These agreements are most commonly used for home loans or mortgages for under-construction properties.

The agreement lists out the status of every party and monitors the important documents. A list of rights and remedies for the buyer against the lender or the builder is also written in the agreement. In addition, important details regarding the project such as EMI, phases of construction, and date of possession are also mentioned in the agreement.

Tripartite agreements also have a unique facet called subordination. It is a legal process that defines how to whom and when agreements in the property are assigned to the parties. It keeps the buyer safe from fraud and prevents the developer from selling the same property to another party. For instance, in case of the demise of the buyer/borrower, the developer may have the first right to lien for what is rightfully owed to him, and then the bank would retain a lien on the remaining assets. It also acts as a deterrent to the developer to not slack on his liability to construct the building as per the specifications.

Is the tripartite agreement important?

In short, a tripartite agreement is a legal agreement that lists out the responsibilities of each party. It also decides on the terms and conditions, which are enforced during the duration of the construction. Such agreements allow everyone to protect their rights.

In case of default, the banks get their due. And in case the developers do not work on the property construction, the bank acts as the arbitrator and protects the interest of the buyer. Thus, it works as a system of checks and balances for everyone involved.

When are tripartite agreements useful?

  • When a home loan is taken out for an under-construction house, a tripartite agreement is made between the buyer, the seller, and the financing institution.
  • At the time of selling the flat, if the society is registered, then a tripartite agreement between the seller, the buyer, and the society is made.
  • When a society becomes a part of a tripartite agreement, it affirms that it has no objection to the transfer and confirms the transaction.
  • If there is no society, then a tripartite agreement between the builder, the seller, and the buyer is made.
  • If a builder becomes part of a partite agreement, the responsibility of the builder is to make the new buyer a member of the society.
  • In case of encroachment on a property such as a house or a farm, a tripartite agreement is needed.

Benefits of a third-party in tripartite agreements

  • The third party in a tripartite agreement indirectly becomes part of the transaction.
  • Such a party cannot claim in the future to be unaware of the transaction.
  • If the third party has any legal successors or heirs, they cannot make any challenge to the transaction.
  • It helps convince financial institutions or banks about the genuineness of the sale, and thus provides financial assistance to the buyer in the form of a home loan to secure the property.
  • A tripartite agreement implies that the seller has no arrear payable to the third party.


Tripartite agreements are quite useful to buyers looking to secure a housing loan for under-construction properties. While the property is under construction, you will not be its legal owner. Hence, the builder is a part of the agreement. Such agreements are particularly useful to avoid any future conflicts that may arise due to differing claims, such as in the case of the death of the buyer or default of payment.

Prior to signing the tripartite agreement and securing a home loan, the primary step is to pay the down payment of your property. Don’t worry. You don’t have to search high and low. HomeCapital provides you with any assistance you may need. We are India’s first down payment provider. Find out your eligibility for the down payment loan today and only repay the principal. 

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