Most builders provide one of the four options—Down-Payment Plan, Construction-Linked Plan, Flexi-Payment Plan and Time-Linked Payment Plan. Calculate the benefits that the builder gives you and weigh them against the costs/penalties that would be levied if you do not make timely payments
Buying a home is perhaps the biggest decision you take in your life. The amount involved is huge, EMIs (equated monthly instalments) take away a large chunk of your monthly salary and go on for a long time, if you take a loan. Thus, the repayment should be a well-thought out, structured plan. Since payment may be a cause of worry for many buyers and may turn them away from buying homes, builders, these days have come up with options that would encourage buyers to take loans and book properties, even before construction starts, let alone possession. When buying home, keep these payment options also in mind, other than factors such as distance from the office, amenities offered, surrounding infrastructure, built-up area, etc. While applying for a home loan, calculate the benefits that your builder gives you and weigh them against the costs/penalties that would be levied if you do not make timely payments.
Is a pre-approved home loan a good option?
When buying a home seems unaffordable because of shooting property prices combined with high interest rates, these options come in handy for you. Thus, most builders provide one of the four options—Down-Payment Plan (DPP), Construction-Linked Plan (CLP), Flexi-Payment Plan (FLP) and Time-Linked Payment Plan (TLPP). Under these options, flats are booked even before construction starts. It is a win-win situation for both the builders and the buyers, since buyers lock-in their prices much before they actually buy it, and builders get funds for construction.
Traditional down payment plans require you pay 10%-15% of the purchase price when you book your property, another 80%-90% within a given time-frame, say 45-60 days and the rest, at the time of possession. This remaining amount will include the balance amount of the cost of property and all charges levied by different authorities including Stamp Duty and Registration Fee, around 5% of the value of the property; the initial property tax, society maintenance charges; other charges of using society facilities such as gymnasium, swimming pool, parking, etc.
Risks involved in such cases include delay in construction and delivery of property that has happened in most cases, actual delivered property differing from what was shown in the sample, different constructed area, and increase in property prices by the time property is delivered to you. All these problems discourage buyers from buying property,
To avoid these problems, builders have come to with EMI sharing options. EMI sharing is advertised saying “no EMI till possession” but it actually works differently for loan borrowers. Under the “full sharing of EMI” option, the builder pays the interest component of your each EMI while under the “partial EMI sharing” option, the builder will pay a proportion of your EMI interest component. EMI sharing option is applicable for a certain period of time with the complete EMI to be paid by you thereafter. Some builders introduce an additional clause of paying at a fixed rate of interest, which could be challenging for floating rate borrowers.
Real Estate Malpractices: Home-buyer at the mercy
Construction-linked plans require you paying a booking amount—around 10%-12% of the purchase price upfront while the rest is linked to construction milestones, 20% with each floor constructed, for example.
Flexi payment option, on the other hand, is a combination of both the above options, where the buyer has to pay about one-third of the price while booking and another one-third linked to milestones, while the remaining amount would be paid at the time of possession.
In comparison to one another, the construction-linked payment plan is more suitable than the other two since the risk is the least, if the payment is not timed and completely linked to construction completed. Moreover, the builder would also want to complete construction fast in a bid to get cash flowing in. That said, the track record of the builder is an important parameter to be taken into consideration.
From the loan perspective, construction linked loans are more expensive of the two, since they have a longer tenure; only interest payment is due till the property in under construction, principal repayment starts after possession.
Time linked-repayment plans
payment of these loans has to be made at a pre-decided point in time and in pre-decided proportion and are therefore riskier in terms of combating delay of construction. In case you pay 10% of the total amount at the time of booking and the rest at regular intervals of say, one year each, in three equal instalments, your payments are not in tandem wit
