Purchasing a house is a major financial decision. Since it involves a large sum of money, finances become a key concern for most home buyers, especially first-time buyers. To enable hassle-free property transactions, many developers offer various payment plans for buyers. One of the popular payment models is the flexi-payment plan or flexipay. This payment plan involves a combination of down payment and construction-linked payments, which ensures the buyer’s convenience.
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What is a flexi-payment plan?
Developers offer different types of payment plans to facilitate easier property transactions for buyers. Flexi-payment is a payment plan offered for property buyers where they make a down payment of a certain amount and pay the remaining in EMIs over a specified period. Flexible payment plans are available as 50:50, 30:70 and 20:20:20:20:20 options.
Down payment plan
In a down payment plan, the property buyer must pay a specified amount of money as part of the property purchase. It is a traditional payment method that has been followed for years. A down payment is a percentage of the total property cost. Developers demand around 10-15% of the total cost at the time of booking. The next 80% of the amount must be paid by the buyer within 30 days of booking. The final 5% is paid at the time of possession.
The down payment plan involves attractive discounts from developers. This payment plan is ideal for investors if the developer or seller is trustworthy. One can check their track record to know if they have delivered homes within the deadline. This is necessary as a significant amount (95% of the total property cost) is paid by the buyer in advance.
Construction-linked plan
A construction-linked plan (CLP) is a payment plan that is beneficial for the buyer and the developer. In this payment plan, a buyer can book the property even with limited liquidity while the developer gets the finances to start the project. In a CLP, the payment is based on the progress of a project.
A CLP involves an advance payment of 10% of the total property value at the time of booking. Another 10-15% is paid within 30 days from the date of booking. The homebuyer pays the remaining sum at each stage of the construction, such as the foundation laying of the house, completion of the basement and the erection of the walls.
An EMI interest is applicable under this plan. The EMI on the principal amount starts after the buyer gets possession of the property. While this payment plan costs more for a buyer, it is beneficial for them as they have to pay only the interest amount instead of the actual EMI until they get possession of the property.
Benefits of flexible payment plan
Dual advantage
A flexi plan comes with the benefit of two payment schemes. A property buyer has to make an initial down payment and then pay EMIs after the property possession.
Enables buyers to save money
Since the payments will be based on the construction status, this helps them to plan their finances better and make significant savings.
Discount from developers
As the buyers pay an initial lump sum amount, they can save 5-6% of the total property cost. Developers quote a price keeping this discount in mind.
Property buyers find flexi-payment a suitable option as they can profit from the potential capital growth over the payment duration. As the property’s value increases over time, they benefit from this appreciation, especially when trying to refinance or sell the property.
Flexi-payment plan: Risks involved
In flexible payment plans for property purchases, the buyer faces the challenge of recovering the money if the project gets stalled after booking. In a flexi-payment plan, a buyer may have to pay interest of almost 50% from the first year. However, an interest on only 35% of the amount is charged in CLPs. Thus, flexi plans are seen as a costlier payment scheme than CLPs.
Housing.com Viewpoint
When going for a payment plan, a homebuyer must consider various factors, especially their financial situation. It is better to compare various plans and their pros and cons to make an informed decision. This will ensure a smooth property buying experience.
FAQs
What is a flexi-payment scheme?
A flexi-payment scheme involves a mix of down payment and construction-linked payment plans.
Is a flexi-payment plan different from a home loan?
Banks or financial institutions offer flexi-payment plans with home loans. Home buyers must contact the lender to know the various options available.
Is the flexi-payment plan better than the possession-linked payment plan?
The risk in possession-linked payment plans is less compared to flexi-payment plans since the funds do not remain blocked in case of project delays. However, a flexi-payment plan comes with various benefits and enables a buyer to save. One should consider factors, such as end use of the property, and assess their financial situation before making a decision.
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