What is Assignment Agreement? How to Register Assignment agreement in Karnataka for purchase of property?

An assignment agreement involves transfer of property from an original party (also know as real-estate wholesaler or assignor or first party) to a new party (also know as assignee or second party).

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Assignment is one of the real estate investment strategy, it can involve time and financial pressure but the assignor can make potential money

Assignment works on the following pattern:

The first party or assignor finds a property (mostly an under construction property) and enters into a sale agreement with builder to purchase the property. The sale agreement consist of seller details , buyer details, buying price, tentative date of possession etc..

When the first party finds a new buyer that can fulfill the terms & conditions of principle sale agreement like buying price and possession date. The first party assign a tri-party agreement with new buyer, the try party agreement between first party (assignor), second party (assignee) and third party (builder)

The first party (assignor) collects an assignment fee for finding a new buyer, take around 3–5 years to realize the returns in assignment strategy.

For example:

The buying price in principle agreement is Rs. 50,00,000 (at the time of project launch)

The buying price in assignment agreement is Rs, 70,00,000 (at the time of possession)

The assignment fee is Rs, 70,00,000–50,00,000 = 20,00,000/-

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Following is the cost to register assignment agreement

• Stamp Duty: 0.1% of buying price
• Registration fee : Rs. 200
• Scanning Rs. 35 per page

Documents required to register assignment agreement:

• Principle sale agreement between assignor or builder
• PAN of assignor, assignee and builder

Follow the below procedure to register assignment agreement:

• Draft the assignment agreement in word document 
• Print the draft on A4 size paper
• Book the appointment for registration
• Pay the government fee (stamp duty, registration fee and scanning fee)
• Register the assignment agreement in sub-registrar office

All the parties including assignor, assignee, builder and two witnesses must present in sub-registrar office for registration of assignment agreement.

Note:

• In the above answer, principle sale agreement means the sale agreement between assignor and builder 
• In real estate, there is a term called “One Closing” and “Two Closing”.
  • One Closing means one transaction take place which the end buyer (assignee) pays the seller for the property purchase.
  • Two closing means two transactions take place in succession for one property, the 1st buyer (assignor) purchase the property from seller rather assigning, Then, immediately resell said property to end buyer (assignee)
• Most of the real-estate investors prefer “One Closing” rather “Two Closing” to avoid the payment of stamp duty. Assignment agreement is most preferred option for investors because it has one closing.
• Assignment agreement can be registered or un-registered (Not mandatory to register assignment agreement)
• To process home loan, assignment agreement should be either registered or adjudicate 0.1% of buying price
• If you are self-financing the purchase (without home loan) and the property is ready to occupy, you may skip the assignment agreement and register the sale deed as this may save your time and take possession immediately after deed registration 

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