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Home Internet Indian real estate sector: What is option contract?

Indian real estate sector: What is option contract?

July 2, 2015 by Amal 1 Comment

The real estate sector in India is booming at a very high speed. If you are looking for property in Delhi as investment options or commercial purpose, right time is now. Many property websites are offering all type of properties available in India.

delhi real estate

With liberalized economy, reduced home loan interest rate and relaxation from restriction on foreign investment, much affordable real estate deals are taking place in Delhi and other cities. Leading to the boom of real estate sector, much development are coming with shopping malls that enhance overall commercial activity in line. Real estate business key players are in the field of real estate Delhi builders, consultancy and promoters.

Traditionally investment in India was in commercial or residential sector even though other sectors showing now promising like school land, agricultural land, resort land and hospitals. Most interest thing is this phenomenon is not only restricted to metro cities rather now it is moving to smaller cities too like Pune, Indore, and Jaipur etc.

Real estate options

These real estate options are generally contracts which allow investor to buy an underlying property at its maturity for some price on future date, the both are determined in advance. Here the buyer is purchasing the option whether to buy or not that property after reaching the specific period.

You can come to deal with this concept of option while purchasing stocks also. These options provide lot of choice to a buyer. They can wait till option expiry or sell it to other buyer before expiry of date.

Commonly this option is used by the developers and those investors who bought commercial or luxury residential property. The option provide more flexibility to the buyer and less cost involves in trading and better investment opportunity offered with little benefit to the sellers.

Certain benefits from entering these real estate option contracts are:-

  • Get high amount of money to flip this property, such options is a useful tool to avail profit more using less amount of capital as real estate option fee.
  • Those people who don’t have much cash in hand and wish to purchase a house can go through real estate option as it allows them locking the set price and time is given to secure remaining finance.
  • Moreover option gives the buyer right, not obligation to buy that underlying property. Individuals have the time to evaluate related law, doing market research and inspection of land in order to assume that they fixed its price, when they finally decided to buy that in future.

Legal Requirements

Like any contract related to land, option agreement too comes with statute of frauds, therefore, it need to be:

  • Written format and any change or cancellation in the option should also be written well
  • Sign of the seller must be there

Additionally like all other contract, there must be consideration to be enforced that means some value is given in return of promises made in that contract. This option contract should show consideration paid for the deal. Without any consideration seller can easily withdraw the offer without any liability of breach of contract. Rather in the consideration value should be stated even it is just one rupee, it’s enough. It is true in this case or adequate to subjected to the contract.

This option should show clearly it sales price, the price for that land once option come into existence or mean to determine the price like showing what will be final price to pay. Conditions related to the option to be exercise should be stated clearly in that contract.

Filed Under: Internet

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Comments

  1. Henry Rodrigues says

    July 27, 2015 at 7:16 am

    It’ not booming yet, it might boom because the property prices are low. Buyers are being sceptical about the fall in the prices is justified because they are more rate cuts in the future. This lag in real estate prices that has been created is the outcome of this buying behaviour of the buyers which i think will continue for few more months because when it comes to real-estate the buyers won’t resist to wait for long http://bit.ly/1C8vHYR

    Reply

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