Home buying is mostly one of your biggest life time fulfillments and it involves huge money transfer. To simplify the cash burden on the shoulders of home buyers, developers have opened up many attractive payment plans in real estate. In fact, we can also say that these payment plans have incepted due to the market slowdown and when builders strategically opened a new sales pitching strategy to lure buyers. Here is the analysis of different kinds of payment plans available in the market.
Down Payment Plan
Popularly abbreviated as DPP, this scheme will demand buyers to remit 10 % of the total amount of the apartment as a down payment during the time of booking. 80-85 % of the remaining amount should be paid within 30 days after the date of booking. The remaining amount of 5-10 % shall be paid at the time of possession, which also includes registration charges, stamp duty and additional charges etc as mentioned to you. In this plan the Equated Monthly Installment (EMI) will commence from the time of booking. The benefit of DPP is that buyers mostly have chances to settle the transaction 10-12 % lower than the estimated cost of the property. The major drawback is that in case of any delay in construction activities, the buyer will have to patiently wait, even after full payment.
Construction Linked Plan
Abbreviated as CLP, this plan will demand to pay 10-12 % of the total amount from the purchaser at the time of booking. The rest of the amount will be paid in installments linked to different stages of construction. The major advantage is that buyers are comparatively getting more time in accruing the money for their home. In case of home loan, this plan will allow buyers to only pay pre- EMI on the interest of the loan. The plan is beneficiary for buyers as they can avoid the worry over any delays in possession. However, if you are taking into account of the interest part to be paid for the loan, buyers are bound to pay more interest in CLP and in this case it is wise to choose DPP. But if the builder throws you more than 15 % of reduction in DP plan, it would be right to choose DP plan than the CLP plan.
Flexi Payment Plan
Flexi payment plan is mostly open for mid stage construction properties. In this plan, buyers need to pay 10 % of booking amount followed by 30-40 % within the next month. The next 50-40 % will be remitted in the similar way of construction linked payment plan, followed by the last 10 % during the time of possession. If you are a financial expert who intends to sell the property after years, this plan suits you. This plan gives ample freedom for buyers as they don’t need to suffer more on the stress of allocating money. The shortcoming of this plan is that buyers are not likely to get any discounts as compared to DPP plan.
This plan is relatively a new payment plan where buyer will be financed by bank. Prior to paying 15 to 20 percent as the booking amount, buyers will apply for a home loan. The buyers don’t need to pay the EMI’s till a fixed period of time. In this plan the builder will pay the interest of the loan (not the principle amount). There are several benefits for this plan:
- The plan is ideal for those who live in rental apartments as they have enough time for accruing money.
- Basically, the buyer will own the property without paying any EMI’s to a fixed period of time.
- Banks will release bank loans at reasonable rates. Since associated with a bank, customers can also feel secured.
- Buyers can also expect higher ROI as prices normally hikes after 2-3 years when construction ends.
- Builders will fasten the project to escape from more payments as interest to bank which also benefits the buyers.
- Banks also benefit as they get a pool of clients within a single project as their customers
However, the disadvantage is that if the builder breaks the payment of interest, the credit score of Credit Information Bureau India Limited (CIBIL) of home buyers will affect.