Half constructed skeletons of housing projects are a common sight. Today, one isn’t surprised even if the plot meant to be constructed in sees no signs of progress apart from some earth being dug up. Delays in housing projects are a reality, we see it all around us, when commuting to work or dropping your kids off to school or even on our way to the mall. A slowdown of sales has forced real estate developers to offer attractive options to lure customers and below is a breakup of the most commonly used payment plans and who they are best suited for
Construction-linked plan: These plans are based on the milestone of construction achieved and requires small periodic payments upfront but the remainder is largely pad when construction reaches specific levels. A typical construction plan will require an upfront payment of 5% or 10%, a subsequent payment in 3 months of 5 or 10%, a 20% payment in 6 months and the remainder when construction reaches the predetermined markers. These plans are best suited for those people who aren’t in a position to make huge financial commitments. Banks offer loans with either Pre EMI’s for initial disbursement and regular EMI’s after final disbursement or regular EMI’s for entire loan even though only a small portion has been sanctioned. Such EMI charge very little interest in the initial years with majority of the repayments going toward repayment of the principal
30:70 Subvention plan: Similar to a construction linked plan, the buyer is required to put down a payment of 10 to 30% while booking. A loan has to be taken out for the difference amount as well for which the EMI will be paid by the builder. The lender provides construction linked payments to the builder and the buyer will start paying EMI’s after a specific period or on possession. These plans are also suited for people with limited financial resources and some offers may only seem attractive on paper. Interest costs absorbed by builders are passed onto buyers through higher prices and if construction is stalled, there are chances the builder will default on interest payments to the bank.
Subvention without loan: This plan sees the builder funding the purchase. Even though no EMIs seems appealing, banks do due diligence and thoroughly research a property which benefits the buyer. Buyers opting for this plan should research if the approvals are in place and that there are no delays with the work. This plan is designed for those individuals with high net incomes and who can make large down payments without need for a loan. Larger down payments attract higher discounts.
Interest waiver on home loan: These plans are for those projects nearing completion. The waiver is for a small period and builders who have tie ups with lenders offer lowered interest rates on home loans. This plan is not for everyone as interest rates are bound to come down. The buyer should instead try and bargain to lower the actual price of the property
Assured rentals: In this plan, the buyer has to make a full payment for which the builder pays rent to the buyer for a fixed period of time which is usually at 1% of the buying price. Is sounds good on paper as one is also getting a return on the investment made but the catch is that EMI payments are to be made by the buyer not the builder, if the rent cheque bounces, there will be a lot of time wasted on court hearings and pleas and pushes. A buyer should opt for this plan only if the builder has trustworthy credentials
Freebies & discounts: Buyers throw in freebies such as furniture or electronic appliances which are just marketing tactics. Buyers should not get carried away with investments worth lakhs of Rupees for a free refrigerator worth RS 30,000.
