Types of Payment Plans for Home Buyers
Published on: 12 Feb 2024
Unlike the past when there was only one payment option to buy a property which was a down payment plan option, developers these days have started to offer various plans to home buyers.
The payment plans are as follows:
- Down payment Plan
- Construction Linked Payment Plan
- Flexi payment Plan
- Possession-linked Payment plan
- Subvention plan
Buying a dream home is a very big step and involves a lot of long-term financial commitment from the buyer's end.
In this blog let’s discuss all the available payment plans and see which one can be best for you.
Down payment Plan
If you are opting for this plan it means you already have funds available with you where you will be paying 95% of the total property value before you take the property in possession.
This is how the transaction works, first you pay 10% of the property value at the time of booking. Your second installment will be paid within 30 days of booking which will be 80-85% of the property value. The3rd installment will be 5-10% of the remaining payment at the time of ownership and finally other charges like stamp duty, taxes, registration fees, etc.
This payment plan comes with advantages like the buyer can bargain about the price and get better discounts as he/she is paying for the property almost all at once. Another benefit is - preferred location charges for possession of units are eliminated even if the property chosen is in the same building or complex.
But this isn’t the only plan we’ll be talking about as it has disadvantages like buyers getting burdened if there is delay in construction or delivery of property. If in case the buyer has decided to go with a home loan he/she is burdened as they have to start paying EMI to banks soon after paying the bulk amount of (85%) to the developer.
Construction linked payment plan
In this payment plan, the buyer generally pays 10-12% of the total property price during the booking and the rest of the payment is made as the project reaches the aforesaid stage.
The pros of this payment plan are that the buyer doesn't have to pay the builder upfront, he can take his time to make the payment which is usually 2-3 years. In case the buyer is opting for a home loan he/she has to pay only the pre-EMI while the construction is underway. That way he/she is not burdened with the full EMI as it starts after the possession of the home.
The buyer is liable to pay a penalty interest in case of non-payment/missing a payment or if the terms which were agreed upon the booking are violated.
Flexi Payment Plan (FPP)
This plan is a combination of the Down payment plan & Construction Linked payment plan in which the buyers pay 1/3rd of the total amount at the time of booking and the rest of the amount is paid when the funds are available as the construction progresses.
This plan proves advantageous to the home buyers who don’t want/have large amounts of funds to put up-front for the payment of the property & would like to pay as per the availability of the funds.
The only flaw of this payment plan is that the buyer does not enjoy the same discount benefits as the down payment plan offers.
Possession linked payment plan
This plan is meant for the buyers who can pay 20-25% of the full purchase price at the time of booking and the rest of the entire amount at the time of possession. This plan provides security and time to the buyers.
This plan gives the buyers security that the builder delivers on time & in case he goes bankrupt they don’t have to pay anything until the completion of the property. Also, this gives the buyers the flexibility to make payment of a major portion of the payment when the possession is complete.
The major disadvantage of this plan is that as the buyer is only paying 20% of the full payment the builder might charge a higher rate towards the rate of development.
Subvention plan
This plan is also known as the 10:80:10 plan. According to this plan, the buyer has to pay 10% of the payment during the booking and another 10% on possession. The remaining 80% will be financed by a bank loan, the interest for which will be paid by the builder till the possession is complete.
This plan is beneficial to the buyer as the initial amount he/she has to pay is significantly less and the EMI starts only after the possession is completed.
This payment might turn into a nightmare for the home buyers if the project stalls as the time period in the subvention plan are 18-24 months and upon completion of this time the EMI of the Loan amount will begin irrespective of whether the project is completed or not.
Best payment plan for you
The best payment plan for you is directly linked with the funds you have or are willing to spend upfront.
If you opt for a home loan then the lender will disburse the payments only on the basis of completion of the project. Thus you have no option but to choose a Construction-Linked plan. Or else if your Financial situation allows you to do so you can choose to make the payment upfront.
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