Understanding Allotment Letter

Understanding Allotment Letter

You might think finding the right property is the hardest thing to do. Well, we agree that it is a crucial step and gets the ball rolling, but what about documentation? Having all the property documents in order is a different game altogether. 

While the Title Deed, Commencement Certificate, Sale Agreement, etc. take the lead, an equally important document is the Allotment Letter.

What is allotment letter?

An allotment letter is one of the most crucial documents when buying a property in India. After receiving the booking amount from the buyer, the builder issues the allotment letter. It is only issued to the first owner and other owners can ask for the copy of the original letter from the seller.

Allotment letter contains information about:

  • Payment
  • Terms of construction 
  • Construction schedule
  • Amenities
  • The final amount that has to be paid to the builder 
  • Delivery date and the builder’s liability in case of delay

The importance

This document is important if a buyer wants to apply for a home loan as it mentions the amount that the buyer has to pay to the builder. 

“An allotment letter is an important document required for getting a home loan. It is issued by a developer or the housing authority, stating the description of the property and details of the amount paid by the buyer to the developer,” explains Rakesh Reddy, Director of Aparna Constructions & Estates.

While the sale agreement is the primary sale document, an allotment letter can come in handy as proof when promised amenities have not been provided as specified by the builder.

Is it legally binding?

According to the Indian Contract Act, an agreement is enforceable under Section 10, if it is made by competent parties. Now, since the allotment letter has all the essential constituents of a contract, it is also a legally binding document. 

Can a builder cancel the booking after issuing allotment letter?

No, the builder cannot cancel the booking unilaterally after issuing the allotment letter. In case, the builder wants to cancel the booking he has to send a notice to the buyer stating the details of the refund of booking amount. 

The new order 

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has recently upheld that a letter of allotment from the builder is sufficient proof of investment to avail tax deductions on long-term capital gains (LTCG) when a property is sold.

This new order will benefit several taxpayers as the ‘Agreement to Sell’ is sometimes delayed by the builder, which was earlier considered as the only proof of investment. 

Leave a Reply

Your email address will not be published. Required fields are marked *