Homebuyers enjoy clear-cut financial gain with deferred payment plans

Some deferred payment plans also involve payments at various stages of construction
Several real estate developers across the country — Godrej, Oberoi, Suntek, Runwal, and many more — are currently offering deferred payment plans. Here, the buyer pays 5-30 per cent of the property cost at the time of purchase and the balance at possession.

Some deferred payment plans also involve payments at various stages of construction. They could come in various permutations—20:60:20, 30:50:20, etc. These schemes are different from the subvention schemes banned by the National Housing Bank, where the buyer took a home loan and paid the builder the entire cost upfront. In lieu, the developer paid the pre-EMI (the interest component of the loan) during the construction period.

The primary reason developers are offering these plans is to provide a fillip to sales. “Developers are coming up with a variety of innovative offers to overcome issues such as inventory pile-up and cost overruns due to the lockdown,” says Rahul Phongde, chief business officer-residential services, Anarock Property Consultants. These schemes enabled developers to register sales even during the lockdown. “RERA doesn’t allow developers to collect more than 10 per cent from the buyer without registration of documents. It was difficult to do so during the lockdown,” says Kamal Khetan, CMD, Suntek Realty.

Due to project delays in the past and the uncertainty surrounding their incomes in recent times, buyers have become averse to taking on a massive liability like a home loan unless they have visibility on delivery. “These plans are to assure buyers and reduce their risk in house purchase,” says Gagan Ramdev, national director-capital markets, Colliers International India.

Buyers who plan to buy with their own money get some extra time (as long as construction lasts) to accumulate the balance amount. Such schemes (the 10:90 or 20:80 types) also help buyers avoid having to pay rent and pre-EMI simultaneously. They also put the onus for timely delivery on the developer.

Buyers enjoy a clear-cut financial gain. “They can save on interest cost as they can start their home loan later than in a construction-linked scheme,” says Adhil Shetty, CEO, BankBazaar. Let us explain this with an example. Assume that a residential property costs Rs 60 lakh. The buyer takes a loan of Rs 48 lakh (interest rate 8.5 per cent and tenure 20 years).

Possession is in 16 months. Let us consider three payment plans: 20:80, 30:70, and a construction-linked plan where 5 per cent is paid every month. The less the buyer pays upfront, the more he saves in pre-EMI.

Such plans can have downsides that buyers need to watch out for. “Capital is involved at the construction stage whose cost the developer bears here . It is possible he may charge the buyer a higher price for the property in such a plan than he does in a construction-linked plan,” says Pradeep Mishra, head of Sainik Estates, an NCR-based real estate consultancy. He suggests that the buyer should compare the price being charged in this scheme with the going rates for ready-to-move-in properties or those available in the secondary market in the same area. “If the price is similar, only then are you getting a good deal,” he says. Compare the all-inclusive purchase price, including GST (charged only on under-construction properties), with the price of a ready-to-move-in property.

Even in such schemes, the 10-20 per cent the buyer pays upfront is at risk. Ramdev suggests going with developers who have the financial wherewithal for timely completion of projects. Finally, besides the usual title check, go through the fine print of the sales agreement for clauses pertaining to delays, cancellation, and refund.

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