Buying a home represents a big financial decision by all means. Many people end up spending all their savings on purchasing their homes and also pay a high amount every month in terms of EMIs. While purchasing a home from the developer, which is the right payment plan for you? Here’s finding out!
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Home Payment Plan in India
Looking for a suitable home payment plan for buying your new home in India? There are various kinds of payment plans that are available in the market nowadays and you should be careful in making your choice accordingly. Here’s taking a closer look at the same:
1. Down Payment Plan
This is the most preferred scheme where people usually pay around 10-15% initially as the down payment while booking and the remainder, i.e. 80-85% is paid within 30-90 days of the booking period. The final balance of 5-10% will be paid with any extra charges while taking possession. If you are taking a home loan, then the EMIs will start instantly once the bank makes the payment to the developer. Hence, interest is chargeable on the whole amount from the first day.
You will also not get tax deductions on the principal amount until possession. Yet, if you can manage your cash flows, you will get sizable discounts up to 15-20% in some scenarios, depending on your negotiating powers. However, delays in completion may be a potential risk. You should choose this plan if the project is coming close to its completion date with little chance of the developer skipping the deadline. If you have the funds and a reputed developer, then you will get an ideal bargain under this scheme.
2. Construction-Linked Plan
Payments are tied to the progress of construction. You will have to pay roughly 25-30% of the price in 90 days for booking. Thereafter, the balance amount is payable once you keep completing various milestones. It is roughly 10% of the overall cost upon each floor being completed. You may not get much discounts with this plan. Risks of delays are comparatively less since you pay as per progress. You also get tax benefits under Section 80C from the start.
Choose this scheme if the project is in the early stages and you do not have much cash in hand. Your installments are pre-determined and time-bound, irrespective of progress. Hence, even in case of delays, you are contractually and legally bound to make your payments based on the timetable given by the developer. Delays equate to penalties or interest on the same. Some developers may offer discounts on these plans as well. You can also choose this plan if the project is in the mid-stage and you have some money in hand to partially fund the purchase.
3. Flexi-Payment Plan
This is a fusion of CLP and down-payment plans. You will initially have to pay 10% on the booking along with 30-40% of the value within 30 days from booking. The remaining payment will be done in installments like in a CLP. The final 10% will be paid with other charges while taking possession. This is a safer option since installments are tied to construction stages.
Several real estate developers often come up with various plans including 40-60 payment plans or other special offers. These often help buyers considerably with regard to getting great deals and more flexible payment options while developers also get much-needed cash for completing their projects. There are EMI sharing options at times where developers pay either the whole or a part of the interest paid by the buyer on the principal amount as EMI for a particular duration, making up for delays. Sometimes you will get discounts on the per sq ft rate if you go through the right platform or during any festive offer by a developer.
Choosing the right payment plan is something you should do after closely analyzing your current scenario and available funds. If you are taking a home loan, the financial institution will only disburse amounts based on the progress of the project. Hence, you will have to go for the CLP in this case. This plan is also an option if you are unsure about the capabilities of the developer to finish the project in a timely manner. At the same time, if the financial situation is conducive and you are confident about the developer’s reputation and track record, then you may make the entire payment right away.
