Buying a home is undoubtedly one of the most delightful moments for someone. After so many years of hard work, you’re now settling into your new home. But wait. Did you discuss the payment plans, types, advantages, and risks involved?
If you haven’t, no worries. We have created a detailed overview of these details. Let’s discuss them one by one.
Types of payment plans in real estate
When you buy a house or any other real estate property, you have many payment plan options. These varied plans allow you to own property as per your budget without paying the entire property cost at a time. Here are the different payment plans for your reference:
1. Down payment plan
The down payment plan is the most popular plan among homebuyers. This plan requires you to pay 10-15 percent of the total value of the property immediately at the time of its booking. Then, you need to pay the rest in installments within 45-60 days.
The amount to be paid later includes the balance of the cost of the property and the stamp duty & registration fees, and other charges levied by the authorities. These charges will be around 5% of property value, maintenance charges, etc., on society amenities.
Advantages
A great advantage of the down payment plan is an attractive discount on your desired property. This is because you pay an amount upfront, around 8-10 percent of the property’s total price.
Risks
When choosing the down payment plan, consider your risks as well. If you have a limited budget and make a huge down payment, your cash position will likely to go down significantly. Additionally, if the construction of the property gets delayed or abandoned for any reason, recovering your money becomes more challenging.
2. Construction Linked Plan
A construction-linked plan usually requires buyers to immediately pay 10-15 percent of the property’s value as the booking amount. The buyer can then pay the remaining amount as the construction progresses. For instance, the buyer can be asked to pay 20 percent with the completion of each floor.
Advantages
This plan involves no risks for the buyers. This is because the payment is linked to the progress of the construction. So the buyer does not have to pay if the construction gets delayed. Another advantage is that the builder will be pressured to complete the project on time and maintain the cash flow.
Risks
A potential risk for buyers is that construction-linked plans are costly since they must pay interest to banks or other lenders. The interest amount is huge due to a larger tenure. Therefore, buyers pay the bank more than the property value. Another disadvantage is that the buyer is unlikely to get a discount.
3. Time Linked Plan
A time-linked plan is another helpful option for property buyers to explore. Under this plan, the builder sets a timetable for installment payments, and you have to pay accordingly. So, there is no construction progress linked to this plan.
Advantages
A major advantage of the time-linked plan is that you get an attractive discount of 8-10 percent on the basic value of the property. That will help the property owner save a huge amount of money.
Risks
A big disadvantage and risk for the buyers is that they must pay installments when there is a considerable delay in the project’s construction. The builder may give you the time to arrange funds. There is also no surety that the construction will be completed on time.
4. Flexi Payment Plan
The Flexi payment plan is a good option when you can pay 50 percent of the property’s total value as the down payment when construction starts. This is a popular plan amongst users when they want to buy a newly launched property.
They can book the property instantly and pay the amount after 3-6 months. Then, the rest of the amount is payable per the progress made by the construction. The plan, therefore, combines the features of both the construction-linked plan and the down payment plan.
Advantages
An advantage of choosing the flexi payment plan is that it helps the buyer by offering an attractive discount. Usually, the buyer can extract a 5 percent discount on the basic cost of the property. This is mainly due to the buyer making around half of the property’s cost as an upfront payment.
Risks
Flexi plans have their own risks for buyers. If the construction work gets delayed, buyers may recover the booking amount after some time. Many new launches are delayed for varied reasons, which is risky for buyers with limited budgets.
The buyers must also pay almost 50 percent of the interest from the first year. That makes flexi plans costlier than the construction-linked plans. Only a 35 percent interest amount is charged in the case of CLP.
These are the major payment plans. However, many other plans are a combination of any two plans. For instance, a real estate company can offer a payment plan that combines the features of a down payment and construction-linked plans. Under this mixed scheme, you must make an initial payment of 10-30 percent of the property value against the booking. You can pay the rest of the amount in several installments.
Which is the best payment plan?
When considering various payment plans, determine which best suits your budget and circumstances. The funds available to you should guide you in picking the right plan.
If you borrow a home loan, the lending bank will disburse the amount based on the construction progress. That means you are left with only a construction-linked scheme. So, choose this option when you need clarification on the project’s timely completion.
However, if the builder will complete the project as scheduled, you can make the entire payment upfront. Most buyers prefer CLPs since there are frequent delays in projects in India.
It is advisable to consult with a property dealer before deciding on the right payment plan when buying villas or residential projects in Lucknow. Research the market to learn more about beneficial payment plans for your budget and circumstances.
Wrapping Up
When buying a home, buyers have varied payment plans that they can pick from depending on their budget and circumstances. Down payment plans, construction-linked plans, time-linked plans, and flexi plans are some of the major schemes. Each plan has advantages and risks, so pick one carefully.
