Buying a property is not a simple process as it requires us to manage our finances and understand the legal procedure around the home buying process. Well, if you are looking to buy an under-construction property in Jaipur or any other city, then you might be required to pay token money for booking the apartment. However, it has not been made mandatory by law, but token money is often demanded by the seller. But being a buyer you need to consider certain factors while paying the token money. Otherwise, if something goes wrong, there is a risk of losing money. In this write-up, we have discussed the important aspects of paying token money that you must consider as a buyer.
1) Keep proof of the payment of token money
You should keep the proof of the token money payment either in the form of receipt or MOU. Whether you are receiving a receipt or signing an MOU, it should mention the following details”
a) Information about the buyer and seller: The document should include complete name, father’s name, current address, and details of one of the government-issued id proof preferably PAN of both buyer and the seller. It should provide detailed information about the seller and buyer including their name, father’s name, current address, and details of the government-issued id proof, such as Aadhar number and PAN number.
(b) Property details: The completed property details including, the floor number, the area of the flat, and the amenities in the flat should be written in the property papers.
(c) Payment details: The token receipt of MOU should mention the expected time of signing the sale agreement, the money paid as the token amount, and the amount due at the time of signing the sale agreement.
(d) Timeline: The MOU or registration slip should provide information regarding the timeline for the payment schedule and execution of the sale agreement/sale deed.
(e) Termination clause: The MOU should specify the conditions under which the agreement can be terminated and a refund should be made by the seller. Also, if the agreement is terminated by the seller, there should be a provision for a monetary penalty.
2) Know your rights after payment of token money
The seller cannot resell the property if he/she has received the token money from any other party. A property fraud where the seller receives the token money from one person and sells it to another is very common. But being a buyer, you can protect yourself from such frauds by signing an MOU while paying the token money.Also, in case of the sudden death of the seller or buyer, the legal heir will have the same rights. If the seller dies, his heir has to refund the token amount or handover the constructed property to the buyer. The down payment is the initial amount you pay to buy a property. The token amount is a small part of it.
3) Important factors to consider while paying the token money
a) The signs of two witnesses are mandatory: It is important to get the payment receipt or MOU signed by at least two witnesses. In this way, if any dispute arises between the two parties, both parties can prove the authenticity of the MOU.
b)Avoid paying the money in cash: Paying the token money in cash is suicidal for the buyer. You should always pay the token amount via bank transfer and avoid paying it in cash.Last but not least, we suggest you keep the token money as low as possible. Also, the risk of paying the token money should not be taken unless the home loan application is approved. Remember that the token amount is only a part of your down payment and cannot be used interchangeably.
Conclusion:– If you are looking to buy a real estate property, it might be mandatory to pay token money to book the property. As a buyer, you should take certain precautions while paying the token amount and keep the proof regarding the same. Also, the token amount is only a part of your down payment and it cannot be used interchangeably.