Understanding Payment Schedule in Under Construction Projects: Exploring Different Types
Purchasing a property under construction requires careful consideration of the payment schedule. Property developers offer various payment plans to cater to different buyers’ preferences and financial capabilities. In this article, we will explore the most common types of payment schedules in under construction projects, helping prospective buyers make informed decisions that align with their needs.
1. Construction Link Payment Plan: In this payment plan, the payment schedule is linked to the progress of the construction. The buyer pays installments at different stages of construction completion, such as foundation, plinth, superstructure, etc. The amount paid at each stage is typically a percentage of the total property cost. This plan offers transparency and ensures that the buyer’s payments align with the project’s development.
2. Bullet Payment Plan: The bullet payment plan involves making payments at fixed intervals, typically every six months or once a year. This plan is suitable for buyers who prefer to manage their finances in larger chunks rather than making regular monthly payments. However, it may require careful financial planning to ensure timely payments.
3. Moratorium Subvention Plan: Under this plan, the buyer pays installments based on the progress of construction, similar to the construction link payment plan. However, during the construction period, the buyer does not pay the interest on the home loan. Instead, the bank or financial institution charges the interest and accumulates it in the principal amount until possession or a pre-decided time. This relieves the buyer of the burden of interest payments during construction.
4. Builder Subvention Plan: In the builder subvention plan, the buyer pays an initial amount, usually 10% or 20% of the property cost, irrespective of the construction stage. The remaining amount is paid at the time of possession. This plan offers convenience to buyers who prefer a lower upfront payment, as the major portion is deferred until the project is complete.
5. Bank Subvention Plan: Under the bank subvention plan, the buyer pays an initial amount, typically 10% or 20% of the property cost, and the rest is disbursed by the bank directly to the developer as construction progresses. The interest portion on the disbursed amount is paid by the developer until the buyer gets possession. This plan provides financial security to buyers as the bank is involved in monitoring the project’s progress.
Choosing the Right Payment Plan: When selecting a payment plan for an under-construction property, buyers should consider the following factors:
- Financial Capability: Assess your financial capacity to make regular payments as per the chosen payment plan.
- Construction Progress: Evaluate the project’s construction progress and how it aligns with the payment schedule.
- Interest Implications: Understand the interest implications and charges associated with each plan.
- Developer’s Reputation: Consider the reputation and track record of the developer in delivering projects on time.
Conclusion: The payment schedule in under construction projects plays a significant role in buyers’ decision-making. Understanding the different types of payment plans, such as construction link, bullet payment, moratorium subvention, builder subvention, and bank subvention, can help buyers choose a plan that best suits their financial needs and offers peace of mind during the property buying journey. It is essential to conduct thorough research, seek professional advice if required, and make an informed decision based on individual preferences and circumstances.
