Developers offer different plan options to prospective clients

The real estate industry is experiencing increasing competition and slower sales. Developers are offering attractive incentives to convince customers to purchase because of these factors.

As a buyer educate yourself with the following plans before signing up with the builder.

 Down payment plan

This plan requires the buyer to pay the entire amount (the amount stated in the agreement) when he books the flat/villa. In this type of booking, the buyer must pay 10% at the time of booking. The buyer must deposit within one month of the booking date.

If there are delays during the project, customers may lose their money indefinitely. The buyer can choose This plan only if the builder has a good reputation and the customer uses his savings for the payment (bank loans are not available in this type of scheme). The RBI instructed banks in September 2013 to stop offering home loans with such a payment plan.

Time Linked Plan

This plan requires that the purchaser pays the amount according to the allotment letter from the builder/developer. Government Organizations (National Building Construction Corporation Limited and Housing Boards of State Governments) offer this plan. The allottee must pay the money according to the dates. The apartment is available at a fair price. The government offers this plan, and handing over of the flats is usually within the timeframe.

Flexi-Payment Program

This plan requires that the purchaser pays 10% (or the agreement amount) to the builder/developer when they book the flat/villa. The buyer must pay the remaining 30%-40% within one month. The rest of the amount must be paid according to the construction stage of your building/project. The average discount for the purchaser is 6-8%

Construction Linked Plan

This plan requires that the buyer pays 10% (the agreement amount) to the builder/developer when booking the flat/villa. Payment of The 10% amount must be within one month. The rest is due according to the stage of construction of the building/project. The builder usually demands 10% for each floor’s roof casting. The buyer approximately gets 2 to 3 years for the payments.

Benefits

This arrangement is great because the payments are in link with the completion of construction. This offers many benefits to the buyer if he chooses to take out a loan for his home. The purchaser pays only the interest amount on the loan amount during construction. This allows him to save some money as margin money.

This scheme is less risky because the investment is not immediate, and the money is distributed to the builder in stages.

Drawbacks

This plan may seem appealing, but builders have discovered a way around it. The superstructure (skeleton) is complete by the buyer or his bank. It has cost the buyer 80-90% of the apartment’s total cost. The interior and finishing stages (doors, windows, and marble fittings) take anywhere from six months to a year.

At the initial stage of the project’s finishing stage, the builder decides to delay it and extend its duration from two to four more years. After he has collected the majority of the apartment’s costs, he diverts the buyer’s funds to other projects or to purchase land for the next project. The buyers feel cheated because they are unable to access their money.

Possession Linked Plan

This payment plan is the latest and most popular. It is created in response to the current slowdown. Most developers are now financially sound and prefer possession linked plans (PLP) over construction linked plans.

Benefits

The PLP plan allows for two payment stages. The first payment is 10-25% of the total cost. However, the buyer must pay the balance on taking possession of the property. This plan has the greatest advantage of reducing development risk for the buyer. It reduces the risk of any delay and development of the project. The plan requires that the builder takes responsibility for completing the project within the agreed time frame to collect the balance from the buyer. The buyer is only responsible for 10-25% of the project’s total cost. This makes him less risky than CLP.

You also get monetary benefits from this plan. As an owner, you can rent an apartment with 20-25% of your total cost. You can then accumulate additional money for two to three years, depending on how long it takes to complete the project. You don’t need to take out a large loan. The CLP allows the buyer to take out a home loan immediately after booking. During construction, he will have to pay the pre-EMI (interest component) and rent. The PLP plan allows him to save 100% on pre-EMI costs.

Pay attention

The PLP plan is a significant improvement on the CLP. However, homebuyers should consider a few things before making a decision.

1. Cost  Difference: Are the costs under PLP and CLP different? Both PLP and CLP plans should have the same total cost for the flat/villa. If prices are different, the developer will have already included funding costs in the PLP plan. This means that he will continue to collect interest from your and decline to offer you the apartment. Builders usually charge a 10-15% premium for the PLP program. You may not be able to bargain hard for the apartment’s cost if you choose such a scheme.

2. Verify the Builder’s Financial Strength. The PLP scheme transfers a greater portion of the risk to the developer. The buyer must ensure that the developer is financially sound and has received financing from a bank.

3. Due diligence of the Property/Builder: It is important to do your research before purchasing a flat. Are all necessary approvals in place for the development of the project? What is the developer’s track record in completing projects on time? Is the location worth the price? How much will the apartment’s carpet area be in comparison to the super built-up area? To reduce costs, ensure that the developer does not compromise on quality and specifications. It would help if you also verified that at least two public sector banks had approved the project.

Do You Choose The Pure PLP Plan or Not?

Yes!

This means there should be only two payments: one on booking and one on possession. Developers are desperate for cash and will try to lure you with all kinds of tempting offers. Developers are trying to avoid the ban on 80:20 schemes by offering a loan from the bank to the buyer who chooses the CLP plan. The developer pays interest until possession to the buyer, while the bank pays the money to him. These agreements with developers are risky. What happens if the developer doesn’t pay you interest? You are responsible for any defaults on your bank loan.

The PLP plan is a result of slowing sales and developers’ desire to sell more. You might not see it again once the market recovers, so take advantage of the opportunity while you can.