Which payment plan suits your pocket?


With the market witnessing a slowdown over the past couple of years, payment plans that have been launched recently, have become more favourable towards buyers

When a buyer opts to purchase a home, s/he may come across various payment plans. Nonetheless, one should check out the pros and cons of each plan, before making a choice.

 

Down payment plan

Under this scheme, the buyer pays 10% of the total cost of the house as down payment, at the time of its booking. Of the remaining amount, 85% has to be paid within 30 days of the booking date, while the balance 5% is paid at the time of taking possession.

Thus, in this plan, the buyer pays 95% of the total cost, to the builder, prior to possession. If you take a home loan, the EMI begins immediately after the bank has paid the bulk amount (85%) to the developer.

Pros: As you pay such a high amount upfront, you can bargain for discounts–of around 12-15% in the current market.

Cons: If there is any delay in possession, you will have little leverage, as you have already paid almost the entire amount.

 

Construction-linked plan

In this plan, the buyer pays 10% of the flat’s cost, at the time of its booking and another 10% within 30 days. The remaining amount is paid in installments that are linked to the progress of construction.

Pros: The buyer gets two-three years to collect the money required for payment. If he has taken a home loan, he pays only a pre-EMI (the interest on the loan) while construction is underway. The full EMI begins only after possession. Moreover, the builder doesn’t get paid, if construction doesn’t progress.

Cons: By the time the superstructure is ready, the buyer or his bank would have paid up almost 80-90% of the cost of the apartment. Subsequently, the interior and finishing work should take a year or so. However, at this stage, developers sometimes delay projects by 2-5 years, explains Sanjay Sharma, MD of Qubrex Realty, a Gurgaon-based real estate consultancy. Also, the pre-EMI that the buyer pays adds to the total cost of the loan.

 

Flexi-payment plan

This plan combines the features of a down-payment plan and a construction-linked plan. Here, you pay 10% on booking and another 30-40% of the total cost, within 30 days of booking. The balance 40-50% is paid in instalments, similar to a construction-linked plan. The final 10% is paid at the time of taking possession.

Pros: The buyer has to shell out less money upfront, than in a down payment plan.

Cons: Discounts that builders offer are likely to be lower than in a down payment plan.

 

Subvention scheme

In this scheme, the home buyer pays 10-20% of the cost of the apartment at the time of its purchase. The balance is paid by the bank to the developer, under a three-way agreement between the developer, the buyer and the bank. During construction, the developer pays the interest on the loan to the bank. The bank disburses money to the developer, as construction progresses. The buyer’s EMI begins only after he gets possession.

Pros: The buyer initially pays only 10-20% of total cost at the time of booking. The buyer avoids paying a pre-EMI and gets time till possession, to save money.

Cons: “If the developer defaults on payment of interest to the bank, it is your credit rating that takes a hit,” says Vishal Dhawan, chief financial planner, Plan Ahead Wealth Advisors.

See also: When should a home buyer opt for a pre-approved home loan?

 

Possession-linked plan

Here, the buyer pays 20-25% of the total cost at the time of booking and the balance after possession.

Pros: If the project stalls, the buyer loses only the initial amount. If the developer delays possession, payment also gets delayed. The buyer can pay the initial amount at the time of booking out of his own funds and take a loan for the remaining amount during possession.

Cons: Unless the developer’s financial position is strong, he may not have the funds to complete the project. Developers may also quote a higher project cost under this plan.

 

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