Buying a property? All you need to know about payment schemes for home buyers

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Published: September 9, 2016 2:11:58 PM

It is important for a home buyer to understand each of the payment detail and calculations relating to their income ranges and both present and future cash flows before going for any of these schemes being offered by developers.

Buying a property? All you need to know about payment schemes for home buyersIt is important for a home buyer to understand each of the payment detail and calculations relating to their income ranges and both present and future cash flows before going for any of these schemes being offered by developers.(Reuters)

To attract home buyers when sales are subdued, real estate developers are coming up with various payment schemes. However, it becomes important for a home buyer to understand each of the payment detail and calculations relating to their income ranges and both present and future cash flows before going for any of these schemes being offered.

Subvention schemes have been prevalent for quite some time in the residential sector and some concerns were raised by the RBI for this practice in the early days. “In times of focus on the trust deficit between the buyers and developers, such plans reduce the financial burden on the buyer and provide a sense that a developer is fairly confident of delivering his project within stipulated timelines keeping his financial commitments in mind,” Rohan Sharma, Associate Director – Research & REIS, JLL India said.

JLL India have got into the details of these payment plans to understand it better as compared to conventional home purchase plans. Take a look on the most widely offered payment plans:

20:80 Subvention Plan
Under this scheme, builders ask for 20 per cent upfront payment from the buyer and the rest 80 per cent of loan amount can be arranged via banks, leading to a tripartite agreement between the bankers, developer and buyer.

So, what happens if a buyer goes for this scheme. Developers get the amount directly from the banks and pay the pre-EMIs on behalf of the buyers, which is only the interest component payable on the disbursed amount. However, the actual EMI begins on possession of the apartment.

This scheme usually tends to lock in the buyer till possession of the apartment – they cannot exit their investment in the interim.

10:80:10 Plan
Another type of subvention payment plan where the investor initially pays 10 per cent of the total amount then 80 per cent within 30-45 days of loan amount approval and the rest remaining 10 per cent at the time of possession. Like the subvention plan, it is a direct arrangement between the real estate developer and bank, and locks in the buyer to the project till possession. It is helpful for end-user as it saves them the pre-EMI payout.

Possession-Linked Plan
This plan tends to lock in buyer to the project for a longer period. JLL India throws more light on the scheme and says that the level of price discounts available in such schemes is lower when compared to regular construction-linked or down payment plans.

Under the plans, an investor pays the full amount of his EMI as per his loan amount, as the principal amount does not reduce till the actual EMIs begin. It must be noted that pre EMIs are just payments of interest on the disbursed amount which the developer pays on behalf of the buyer.

Standard – Deferred Payment Plan
Unlike the above mentioned plans that tie up buyer for a longer duration to the project, this plan help gives buyer/investor a better exit plan as there is no tripartite agreement agreement involved. This involves paying a slightly higher booking amount (around 30 per cent) and rest of the loan amount is obtained from the bank himself at a later date.

This also ensures greater flexibility as buyer gets to choose a bank of his choice and could take loan when closer to the project’s completion, as the amount is to be paid on possession.

Real Estate Systematic Investment Plan
This is like a systematic investment plans, or SIPs, under the plans the buyer pays a lumpsum amount at the beginning of each year and the rest of the amount is converted to monthly equated instalments similar to SPIs. This plan is mainly meant for mid-segment housing projects (Rs 60-80 lakhs) in which the builder creates the house buying payments in the form of a SIP.

Real Estate Systematic Investment Plan is usually for buyers who do not want to take a home loan and are confident of their paying capacity in such a flexible monthly form.

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