New Delhi: Developers are offering a variety of payment schemes to attract buyers during the upcoming festive season. It is imperative that they understand what each payment plan entails. The attraction of delayed payments, no EMIs, etc. has to be viewed in conjunction with the restrictions such as inability to sell the property within a shorter investment period, or before construction is completed.
The current payment options being offered are:
• 20:80 Plan
Developers ask for 20 per cent upfront payment from the buyer/investor and arrange the remaining 80 per cent loan amount through their own banks. This provides them with Advance Disbursal Facility (ADF) (the subvention plan which the RBI came down heavily on and asked banks to desist from).
As a variant, developers get the amount directly from the banks and pay the pre-EMIs on behalf of the buyers. The pre-EMI is only the interest component payable on the disbursed amount. The actual EMI starts on possession of the apartment. Usually, such arrangements tend to lock in the buyer till possession of the apartment - they cannot exit their investment in the interim. This is on account of the ongoing arrangement with the developer and the agreement, which usually bars transfer during the construction phase.
• 10:80:10 Plan
This is a deferred payment plan, where the buyer pays 10 per cent initially, 80 per cent within 30-45 days of loan amount approval and the remaining 10 per cent on possession. It is essentially same as the 20:80 plan, and allows ADF to the developer from the bank which is associated with the project. This is a direct arrangement between the developer and bank, and ties in the buyer to the project till possession. It is helpful for end-user buyers, as it saves them the pre-EMI pay-out. Problems can occur if the developer stops paying the pre-EMIs and the burden falls on the buyer.
• Possession-Linked Plan
All possession-liked plans are essentially a variation of the payment plans described above, and tend to tie the investors to the project for a longer period. Also, the level of price discounts available in such schemes is lower when compared to regular construction-linked or down payment plans. In absolute terms, the buyer is still paying the entire amount of his EMI as per his loan amount, as the principal amount does not reduce till the actual EMIs begin. (It must be remembered that pre EMIs are just payments of interest on the disbursed amount which the developer pays on behalf of the buyer.)
These plans can help buyers who save on rent. They will hence save themselves a double pay-out of both rent and interest. However, since these plans are linked directly to the developers' arrangements with banks, it is makes exit for those who are considering investment and intend to sell off before the project is completed difficult.
• Standard - Deferred Payment Plan
A simpler arrangement entails paying a slightly higher booking amount (around 30 per cent); the buyer/investor obtains the remaining loan amount from the bank himself at a later date. This allows an investor a better exit option, while buyers who can come up with the initial higher booking amount could get a bank loan at a convenient time of after 2-3 years, closer to the project's completion, as the amount is to be paid on possession. This allows greater flexibility for exiting, though is more ‘upfront-payment' prone and can cause short-term liquidity issues.
Freebies
Additional freebies likely to be on offer include direct discounts on Basic Selling Price (between 5-12 per cent), electronic appliances, consumer goods, fully-fitted kitchens, gold coins, holiday packages and cars. These freebies translate into marginal discounts only. The value of such discounts is in proportion of the average ticket size of an apartment, which varies across different range of projects.
(Rohan Sharma is Associate Director – Research & REIS at JLL India)
