Gone are the days when down payment was the only option homebuyers opted for purchasing a real estate property. Of late, real estate developers offer a slew of payment schemes for attracting homebuyers. The most widely offer payment plans on real estate properties are discussed below:
Down Payment Plan
Commonly abbreviated as DPP, the buyer needs to pay 5-10% of the property value at the time of booking. Another 80-85% needs to pay in the time frame of 45-60 days and remaining at the time of possession. This remaining amount encompasses stamp duty, registration charges, maintenance charges, etc.
Pros – Because a builder is getting some payment upfront, thus the company offers attractive discount as high as 10% on total price of the property.
Cons – Choosing down payment plan for an under-construction property is a risky venture. It is because if a project delays due to illegal issues, the buyer needs to wait for a long time period for getting the possession. To add further, if construction stalled and a buyer wants to cancel the bookings, recovering deposited money from the buyer would be a tall task.
Construction Linked Plan
CLP or possession-linked plan, buyer needs to pay a booking amount say 10-15% of the property price upfront and rest of the amount is paid after completion of different stages of construction. For instance, the payment structure in the CLP plan is similar to making 20% payment after completion of construction of floor, 10% after tiling and so on.
Pros – Since the payment is based upon the construction of the project, it is the least risky payment plan for the buyers. Moreover, even developers are in hurry to complete the project to ensure regular cash flow.
Cons – If a buyer opts for home loan, CLP burns a big hole in his pocket in terms of interest paid. Buyer needs to pay pre-EMI on the interest of loan till the construction of the project is going on and principal repayment actually starts after possession. So, in such a scenario, a buyer repays more than what he takes from the bank as a loan.
Time-Linked Payment Plan
Under these plans, a buyers needs to pay installments based on pre-determined timetable of developer. These payments are regardless of the construction progress. Like DPP, many developers offer good discount to buyers opting for the time linked plans.
Pros – Good upfront discount at the time of property booking.
Cons – The buyers needs to pay installments at regular intervals regardless of the fact construction is going on or not.
Flexi Payment Plan – This plan is an amalgamation of Construction Linked Plan and Down Payment plan. Under this plan, buyer needs to pay almost 50% when the construction of the property begins and remaining 50% paid along with construction of the project. There is a time gap of approx. 3-6 months booking time and construction time.
Pros – Because a buyer pays almost half of the price of the property upfront, he gets good discount.
Cons – If construction stalled due to any reason, it becomes difficult to recover the money.
Subvention plan is a new payment scheme offered by the developer in case bank finances the project. Before booking the apartment, a buyer needs to apply for a home loan. He does not need to pay any EMI for certain period of time as builder will pay the interest of the loan.
Pros – Banks release loan at reasonable rate of interest, buyers needs not to pay EMI for certain time period and builders intentionally do not make any delay in the project are advantages of this scheme.
Cons – In case builder defaults with EMI, the credit score of homebuyer affects adversely.
It is crucial to understand the pros and cons of each plan before sticking with one payment plan. Choose the payment plan as per your financial situation and convenience to repay.