Confused about the multitude of payment plans offered by real estate developers while you’re checking out your dream home? Indeed, these payment plans can be quite confusing.
Making a full payment was the only option for countless buyers in early years although home loans are now more accessible and there are several kinds of payment plans which are available for greater convenience.
Here’s decoding commonly available home payment plans for buyers:
- Down Payment Based Payment Plan- These are plans where homebuyers have to fork out approximately 10-15% of the value of the property while booking the same. Thereafter, they have to pay the remaining 85-90% of the value of the property within a particular duration. This can usually be between 45-60 days. Any remainder can be paid while taking possession. The remaining figure covers the balance amount, charges of registration and stamp duty (approx. 5% of property value), taxes, club/parking/facility charges and maintenance fees among other aspects.
The key advantage here is that you can angle for a heftier discount from the real estate developer if you are paying money upfront. This naturally means that you can get 8-10% of an unexpected discount if you bargain smartly. The risk in this case is that in case of a delay in project construction and delivery, your money will be stuck completely in the project. Recovering the full money paid to the developer can take time and be a challenging process in case the project runs into legal hurdles or is abandoned. That is the only risk.
- Construction Linked Payment Plan- These payment plans are linked to the progress of construction. In other words, the buyer will have to shell out around 10-20% as the booking amount upfront to the developer. Thereafter, payment of the remainder will be tied to construction progress, say 20% for each floor built and other milestones. Discounts are rarely offered under such plans.
The key advantage in these cases is that payments will be linked to the progress of construction. As a result, these payment plans have the lowest risk quantum for homebuyers. Developers will naturally want to complete construction of the project in a timely manner in order to get money on a consistent basis from buyers. These plans do cost more by way of the interest that is paid on the home loan since they have a longer duration/tenor. Interest payment is only payable on the property which is under construction and repayment of principal commences post taking possession. The only risk is that you end up paying more interest to your bank.
- Time Linked Payment Plan- These plans are not quite popular amongst developers in recent times but they still exist. You can pay in instalments based on a timetable that has been drawn up by the real estate developer irrespective of the progress of construction.
There are discounts offered by a few developers on the cost of the property if the buyers choose this plan. The advantage in this case is that you may get a few discounts from builders. The risk is that there is no guarantee of construction taking place in a timely manner and you also have to follow the schedule given by the developer for making payments. You will have to pay the instalment even if there is a delay in construction of the project. Yet, the risk is lower than paying the entire amount upfront.
- Flexi Payment Plan- Under this plan, homebuyers will have to pay close to 50% of the property value by the time that construction commences. This is a plan followed for newly launched projects and there is a time period of approximately 3-6 months for paying this major amount. The remainder will be paid in phases, based upon construction progress.
This is a mixture of down payment and construction linked payment plans. The advantage is that buyers will naturally get discounts since they are paying almost half of the property value upfront to the developer. In the later stages, the risks are also lower since the remaining payment will be made in instalments depending upon the progress of construction. The risk is that recovering the money will be tough in case the project is shelved or stuck after the booking phase. Interest has to be paid on almost half of the property value in this case as compared to around 20-30% of the property value in case of construction linked plans.
These are some of the commonly offered home payment plans that you need to be aware about. Go for the one which suits your needs in the best possible manner. You will naturally be looking to find a balance between paying lower interest on an under construction property and also evening out the risks of getting your money stuck in case of construction delays.
