By Chandralekha Mukerji, ECONOMICTIMES.COM | 28 Mar, 2014, 02.59PM IST
Buying a house is a huge financial step. Most of us exhaust all our savings and yet would have to take some loan to be able to pay the total cost of the property. To make the situation a little less difficult, builders offer different payment plans and schemes. Choose the one which suits your financial situation the best:
Down-payment plan: It is the most conventional scheme where you have to pay 10-15% upfront, called down payment, at the time of booking and thereafter 80-85% of the total cost within 30-90 days of booking. The remaining 5-10% balance amount, along with any additional charges, is paid at the time of possession. In case you are taking a home loan, the equated monthly instalments, or EMIs, start immediately as soon as the bank makes the upfront payment. So, interest is charged on the entire amount from day one. Also, you’ll not get any tax benefit on the principal value till the possession. However, if you can manage the cash flow, you can get hefty discounts, sometimes as high as 15-20%, depending on your bargaining skills. The caveat here is any delay in completion and delivery, which is common in this sector.
Go for this scheme if the project is nearing completion and the chance of the builder missing the deadline is low. Also, if you have the money and trust the builder, you will get the best bargain under this scheme.
Construction-linked plans: As the name suggests, the payments under this plan are linked to the construction stages. You have to pay around 25-30% of the purchase price within 90 days from booking and the balance in instalments on completing different construction milestones. It is usually 10% of the total cost on completion of every floor. Though you are unlikely to get any discounts under this plan. Risks related to project delays are much less than a down payment plan. Also, you get full tax benefit under 80C from the beginning.
Go for this scheme if the project is in its initial stages or you do not have ready cash in hand.
Time-linked plan: Under this plan your installments are time-bound. You have to make payments based on a pre-determined calendar set by the builder, irrespective of the progress that the project has made towards completion. So, even if there is a delay, you are contractually bound to make the payment as per the timetable. Any delay in installment means you will have to pay penalties– interest on installments payable. It is therefore not a very popular plan.
However, since the risks are higher, some developers offer discount on time-linked plans as well. Also, like in a construction linked plan, you get full tax benefit from the beginning. Go for this scheme if the construction is in its mid stages and you have some cash in hand only partially funding the buy.
Flexi-payment plans: This plan is a combination of down-payment and construction-linked plans. Here, you are required to pay 10% on booking, another 30-40% of the property value within 30 days of booking. The rest 50-40% payment is done in tranches just like in a construction-linked plan. The last 10% along with one-time charges is paid at the time of possession. Since these instalments are linked to the stages of construction, it is a safe option in case of any delay.
Go for this scheme if you want a safe route and are ready to take a hit on the discount.
Special Arrangements: Apart from these four standard schemes, developers come up with special offers from time to time.
Recently a few builders in NCR offered a ’40-60 plan’ during the festive season. Under this, one can pay 40% upfront and the rest 60% on possession. The plan is ideal for projects in their mid-stages of completion. And it worked well for both the cash-strapped builder, who got some immediate inward cash flow, and the buyer who got a safer deal than down payment plan as the chunk of cost was to be paid only after possession.
Also, there are on-and-off schemes like the ‘EMI sharing plans’ where the builder agrees to pay either the entire or a fractional of the interest on principal for a specific period of time. So, these can act as a hedge if the developer agrees to pay the interest EMI till possession.
Here, an interest rate is usually fixed by the developer and in case of any increase in your bank loan rates (for a floating-rate loan) the difference has to be borne by the buyer. However, if it is a ‘Zero EMI Till Possession’ plan, the fluctuation in interest rates will also be absorbed by the builder.
There are some special discounts available as well. Going through a big broking house might get you some additional cut on the ‘per square foot’ rate as they are willing to share their commission to acquire a new client. However, you should know how to haggle to get the best deal from them. If you think you aren’t a hard bargainer yourself, try to get a group discount. Crowd buying is not just available on purchases and services like restaurant and travel, but on real estate as well. There are sites such as groffr.com and grouphomebuyers.com to help you connect with others online if you are finding it difficult to group people offline.
Source : http://goo.gl/liCLqv