Hidden Builder Clauses That Can Drain Your Wallet: The “Whichever Is Earlier” Trap Explained

Homebuyers have been cautioned that seemingly standard builder agreements may contain hidden clauses that can severely impact their finances. Chief among them is the controversial “whichever is earlier” payment condition, which forces buyers to pay based on either a fixed calendar schedule or the construction milestone—whichever comes first. Legal experts warn this clause could lead to serious consequences, especially if the project is delayed.

Understanding Arbitrary Payment Clauses

An arbitrary payment clause refers to terms in builder-buyer agreements that mandate payment either on a pre-decided date or upon reaching a construction milestone—whichever occurs first. In most cases, this forces buyers to release funds even when there is no visible construction progress.

Why “Whichever is Earlier” Puts Buyers at Risk

Industry watchers pointed out that such terms are structured to benefit builders while exposing buyers to unwarranted financial stress. For instance, a buyer may be asked to pay within 60 days of booking, irrespective of whether any actual construction has occurred. This often results in buyers paying EMIs without receiving possession, or even seeing tangible progress on the property.

Impact on Homebuyers

1. Financial Pressure

Experts explained that these clauses can disrupt the buyer’s cash flow, especially when home loans are tied to construction-linked disbursements. Buyers may end up servicing EMIs prematurely, further deepening financial strain.

2. Heightened Investment Risk

Delays in possession, or stalled construction, can leave buyers financially exposed. In such cases, their investment remains stuck without a corresponding asset being delivered.

3. Legal Disadvantage

Legal professionals noted that skewed clauses limit a buyer’s ability to contest delays. Non-compliance with payment, even when justified, may be seen as breach of contract.

Legality of Such Clauses in India

The Supreme Court of India has deemed one-sided clauses—particularly those benefiting only the builder—as unfair trade practices. In the landmark case Pioneer Urban Land & Infrastructure Ltd. v. Govindan Raghavan, the court declared that such clauses are unenforceable if they create unreasonable disadvantages for buyers.

Spotting Unfair Terms in Agreements

Legal advisors recommend watching out for:

• Payment terms not aligned with actual construction stages
• Severe penalties for buyer delays but leniency for builder defaults
• Restrictions on delaying payments even if the project is delayed

Experts strongly advise buyers to consult a real estate lawyer before signing any agreement.

Can You Negotiate These Clauses?

Contrary to popular belief, many clauses in builder agreements are negotiable. Especially in a slow market, builders are often open to revising terms for serious buyers.

Smart Negotiation Tips

• Link payments strictly to construction milestones
• Include penalty clauses for builder delays
• Ensure all terms are documented in writing

How RERA Can Protect You

The Real Estate (Regulation and Development) Act mandates transparency and accountability from builders. Buyers are encouraged to:

• Verify the builder’s RERA registration
• Check stated timelines and delivery commitments
• Understand builder liability for delays and structural defects

Verifying Builder Credibility

To avoid falling into legal traps, homebuyers should assess a builder’s credibility using multiple sources:

• Review project details on the RERA website
• Look up past customer reviews on forums and social platforms
• Check historical project delivery timelines and legal history

What If You Spot an Unfair Clause?

Homebuyers are advised to pause before signing if any clause appears skewed. They can:

• Seek legal counsel immediately
• Request contract revisions or clarifications from the builder
• Escalate the matter to RERA or consumer courts, if needed

In Conclusion

While buying a home is a cherished milestone, experts believe that hidden clauses like “whichever is earlier” can turn the dream into a financial trap. The key lies in being informed, vigilant, and proactive. With legal awareness, due diligence, and regulatory support like RERA, buyers can safeguard their interests and make empowered property decisions.

Disclaimer: This article is intended for informational purposes only and does not constitute legal advice. Please consult a qualified real estate lawyer for personalised guidance.