Simplifying Various Payment Plans Offered by Builders

Buying your home should be a jubilant experience and not a financial burden. To ease your tension and ensure long term financial security, builders have come up with innovative payment plans to make buying property easy for you. But before you opt for any such plan, it's important to understand and select the correct payment plan. Read on to find out 5 simple payment plans that suits your financial budget best. '

Construction Linked Plan

As the name suggests, the payment plan is linked to the construction of the project. You pay about 10 – 12 per cent of the actual cost as the booking amount. The remaining payment is linked to the construction of the project. For example; you pay 20 per cent on completion of the first floor, and so on. The installments are pre-determined and give buyer time to arrange finances as the construction progresses. This payment plan is less risky as it links payment with completion of project. Most banks also offer an option of pre EMI i.e., only interest component of the home loan becomes payable every month and not principal repayment during the construction period of property to avoid overburdening buyers.

Down Payment Plan

A down payment plan is stringent in terms of the time frame. About 20 per cent of the price is paid as the initial down payment; another 80 per cent is paid within a set time frame of 45 - 60 days. The remaining amount is paid at the time of possession. The last bulk includes the balance amount of the property, stamp duty, initial property tax, and registration fees which is around five per cent of the property. It may also include the society maintenance charges.

Though this payment plan gets you a decent discount (8 – 10%) from builder it is also riskier and costlier as you have to bear EMI on full property price from the start till the completion of construction even if the construction is delayed.

Flexi Payment Plan

As the name suggests this plan gives buyer flexibility to pay property price over time period but the payments are time linked rather construction linked. For e.g. the buyer pays 10% of the price at the time of booking and the rest in installments which are time linked such as every 3 months. The risk in this plan is more than construction linked plan but less than down payment plan. 

Possession Link Plan

Payment under this plan is made in 2 – 4 phases. About 20 – 25 per cent of the payment is made at the time of booking, 30 – 35% is paid in the next installment after a fixed time period, another 30 – 35% after another fixed period and the remaining amount is paid after possession of the property. This is actually a variant of flexi payment plan where the payments are time linked but is less risky as large part of payment is linked with offer of possession.

No Pre-EMI Plan

The no Pre-EMI and the Pre EMI sharing plan is a scheme in which the builder agrees to pay the pre EMI on the loan availed for a fixed period of time. The interest is calculated as per the loan disbursed at different stages of construction of the project. However, you have to start paying the interest amount once the fixed period is over. The principal amount payment starts only after pre-EMI stage, until then you are just paying the interest.

You should make a choice of final payment plan based on upfront cash available with you, your risk taking capacity, track record of developer and construction stage of project. For e.g. if a project is 6 months to possession then down payment plan makes most sense and in case if there is sufficient time to complete construction then you should opt for possession linked plan.