List of House Property Buying Scheme in India

Construction-Linked Plans (CLP)

If you opt for this plan, you make an initial down payment and then pay, say, about 10% every time the Developer finishes one stage of the construction, such as the completion of the ground floor. When a Developer crosses a pre-decided construction milestone, your bank will disburse an installment. By the time the project nears completion, either the bank or you would have paid close to 90% of the total purchase price. This scheme is a good one for the Developer and not a particularly rosy situation for the buyer.

What you need to know

Developers often delay the handover and channelise funds elsewhere. Although you will pay the bank only when you take possession, by then, you would have borne the interest on the cost on top of the rent for the place you were staying in. These projects often get stalled when there is a market crisis. But you can enjoy tax benefits on the principal and interest. Opt for the construction-linked plan during your house purchase if you don’t have ready cash.

Down Payment Plan (DPP)

In this traditional plan of down payment for a home, you dole out wads of cash up front at the time of booking. EMI sharing options can help mitigate the risks of the DPP to an extent.

What you need to know

Developers may offer attractive discounts on this plan, but in the event of any kind of delay, recovering the money can be a ride to hell, along with the increased pre-EMI that you will have to pay. Sometimes, what you get in the end is not what they promised initially or the property prices may increase by the time of possession. You have no tax benefits on the principal till possession. However, if the apartment is almost done, then you can purchase under this scheme of down payment for the home, from a trusted builder, because of lesser financial burden.

Flexible Payment and Deferred Payment Plans

Flexi plans combine the features of CLPs and DPPs. Here, you pay 10% at the time of booking, 30% to 40% within a month, and the rest is slab-wise. At the time of possession, you pay the final 10%.

In deferred payment plans, you pay about 30% at the time of booking and arrange for a loan to pay the remaining on possession.

What you need to know

You can enjoy full tax benefits inflexible payment plans or FPPs. The EMI burden in your property investment is less; however, the initial deposit can be relatively high. In deferred plans, the risk is less and exiting the project at any time is comparatively easier. But you could face issues related to short-term liquidity.

Subvention Schemes

If you turn your eye to the Classifieds section in the newspaper, you are likely to see plenty of ads saying “No EMI till possession.” This is the subvention scheme, also known as the 80:20 or 75:25 scheme, which was actually banned by the RBI in 2013. They were, however, later reintroduced with variations.

The tripartite agreement involves the buyer initially paying 10% to 15% to the builder and the bank then funding the rest during construction. As a buyer, your EMI kicks in only after possession. Until then, it is the Developer who shells out the interest cost. If the project price appreciates during construction, that’s even better for you. You have some respite till the construction gets over to arrange for money to pay the home loan EMIs.

In a typical loan agreement, you pay 20% and take a loan for 80%. The bank pays the Developer according to a payment schedule and you pay EMIs for the tenure of the loan. Your repayment plan depends on your bank – pay your EMIs during construction or only the pre-EMI interest during construction and tenure of home loan EMI.

A buyer gets a pre-EMI holiday if the Developer pays the pre-EMI interest. For example, it would then be a 20:80 subvention scheme. Useful when you’re paying rent, isn’t it? For the bank, it helps attract many customers through one project.

What you need to know

Is subvention more of a double-edged sword than a win-win situation? Your biggest concern should be the delay. Delay in delivery translates into the buyer paying the EMIs and rent (if applicable) as soon as the subvention period gets over. Here, there is a risk of overpaying. These schemes are on offer when Developers find it difficult to raise funds or want to divert funds toward other projects.

Also, the Developer is quite likely to hike the base price and then give the ‘holiday’. To make matters worse, in case your builder defaults in some way, your credit score plummets. Exiting the project can be tough, with either a penalty to pay or staying put until after the lock-in period.

Builders, at times, attract customers using ‘buy-back’ and ‘return and assured’ rental schemes. They also have ‘pre-launch offers’ and ‘festive freebies’ to boost sales or raise capital at better rates. At the end of the day, no matter what scheme you choose, ensure that your builder has a credible track record and that all the requisite legal documents are in order.

Remember you need to get a real-estate lawyer to inspect the title deeds, the sanctioned plans, and all sorts of other ‘papers’ during the house purchase. For instance, you don’t want claimants to the builder’s property coming out of the woodwork once you’ve put your name on the dotted line and made the property investment.

Hope this post helped you think about what’s in store during the property booking process. Happy House Hunting!


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