Payment Structures to Know Before Buying Under-Construction Projects

Introduction

The majority of people's primary purchase decision will be buying a house, and there are numerous factors to consider, including pre-EMIs, down payment requirements, interest rates, and eligibility for home loans. You wish to avoid being very eager and sufferings from financial commitments, nor do you desire to be too prudent and lose out on a bigger or nicer property.

Builders nowadays provide the buyer with various payment plans to buy an under-construction property, in contrast to the past when a down payment was the primary way of buying a house. Aside from the conventional down payment plan, the most popular payment options are the construction-linked plan, the flexible-payment plan, and the time-linked plan. Each of these strategies has benefits and drawbacks.

Home Payment Structures

Without a doubt, purchasing a home is a significant financial choice. Most people wind up using all of their resources to buy homes, and they also have to pay large monthly EMIs. Here are some payment plans for under-construction projects that you can check out before investing.

Down Payment Plans

This option is the most popular payment option, where customers often pay a down payment of 10 to 15 per cent when making a reservation. The remaining balance, around 80 to 85 per cent, within 30 to 90 days after the booking. Any additional fees will be paid along with the remaining 5–10% amount after taking ownership. If you are considering a home loan, your EMI payments will begin as soon as the bank pays the developer. As a result, interest is assessed on the entire sum as of the first day.

It is pertinent to mention that the bank will release the payment only after you deposit the down payment in your account. If you have already paid some money to the developer, you must furnish a copy of the payment receipt as proof. You will also have to apply with the bank to release the payment on a given date.

Pros: Since you are paying the amount to the builder up front with a down payment plan, you can receive a sizable reduction on the overall cost of the property. You cannot receive a discount higher than 8–10% with any other plan.

Cons: If there is a postponement in the building and sale of the home, down payment arrangements are quite expensive for the buyers. These arrangements also expose investors to the possibility of the project becoming stalled or even cancelled due to legal concerns.

Construction Linked Plan

Here, payments are made on how the project is coming along. For reservations of under-construction projects, you must pay around 25–30% of the whole cost within 90 days. As the building continues to reach new milestones, the remaining sum is due. After the completion of each floor, it represents around 10% of the total cost. With this plan, reductions might not be very substantial. Given that you are paying according to progress, the likelihood of delays is relatively low. For every tranche of payment, you must provide the bank with a demand letter from the developer. If the banker is satisfied, you then need to submit a written request to release the payment.

Pros: This plan entails the least risk for the customer because the payment is not scheduled and depends on how quickly the development is going. In addition, the builder would also prefer to finish the project on schedule to maintain a steady cash flow.

Cons: Due to their long tenure, construction-linked plans (CLP) are more expensive for the buyer in the form of interest payments made to the lender. Some buyers may find the calculations here a bit more complicated compared to other plans.

=> Read Also: - List of RERA Registered Projects in Mumbai

Flexi-Payment Plan

This plan combines down-payment plans with CLPs. 10% of the total cost must be paid at the time of booking, and the remaining 30% to 40% must be paid within 30 days of the booking. Like a CLP, the remaining balance will be paid in instalments. The remaining 10% will be paid at the time of possession, along with other fees. As instalments are linked to different stages of the building, this is a wiser option for buyers as the chances of the project getting delayed are minimal. Moreover, the developer is also inclined to ensure the timely completion of construction to be eligible for receiving the payment.

Pros: Since approximately half of the purchase price is paid in advance, the buyers can often receive discounts on the property's base price, depending on the developer.

Cons: If the project is unsuccessful following booking, it can be challenging to get your money back, particularly for brand-new launches. When comparing the Flexi Payment Plan to the CLP, interest is imposed on roughly 50% of the cost from the first year onward but only on 35% of the cost in the Flexi Payment Plan. Flexi plans hence cost more than CLPs.

Time-Linked Plan

Some developers also provide time-linked plans, despite not being particularly common nowadays. These plans call for you to pay for your property according to a predetermined schedule established by the builder. This applies regardless of how far along the development is. For choosing this option, some developers will give you an 8–10% reduction on the cost of the base property. But the risk herein lies in the possibility of delays in construction as the builder will receive the payment on a given date, irrespective of the construction stage.

Pros: There isn't much to look towards with such projects, aside from the discount the builder provides for them, as they don't allow you enough time to secure financing or assurance that the building will proceed at the proper pace.

Cons: Even though the building is delayed, the buyer will still be expected to pay the instalments. Nevertheless, the risk is lower than with a down payment plan since you only pay a portion of the total price in advance.

=> Read Also: - List of RERA Registered Projects in Pune

Conclusion

You should choose the best payment option before buying a house and examine your present situation and your financial budget. If you take out a home loan, the lending company will only make payments depending on how well the project is going. Therefore, in this situation, you will be required to select the CLP.

In contrast, you might choose to pay the entire amount up front if your financial condition permits it and you are sufficiently confident in the developer's reputation. This is where Adani Realty comes to offer you exactly what you need. They are known to deliver their projects on time with flexible payment plans available from partner banks and NBFCs. Consult their experts before making a final decision to buy an under-construction property.