Most home-buyers, especially first-time home-buyers, are not clearly informed about the various payment plans available to them. Sometimes they are not aware that more than one plan exists, and other times they do not understand the difference between the different plans. To help ease the payment worries that are common among most buyers, we list in this article most common payment plans/schemes offered by developers:

Down Payment Plan

Under this plan, buyers need to pay 10-15 percent of the total value at the time of booking. A second installment, consisting of 80-90 percent of the remaining value has to be paid within a stipulated time frame (usually 45-60 days from the booking date). The remaining amount (usually the final 10 percent of the total cost) has to be paid at the time of possession. This installment also includes stamp duty, registration fees, property tax, maintenance charges, charges for amenities like swimming pool, gym etc. and other miscellaneous charges (if any).

Since buyers are required to pay a majority amount at earlier stages, they may get a good discount on the total property price if they opt for this plan.

However, this plan is not such a good idea if buyers think they may face delays in delivery or if they are not very confident of the builder (read about builder verification here).

Construction-linked Plan

Under this plan, home-buyers need to pay the booking amount (10-15 percent of the total cost) upfront. The remaining amount is linked to various construction milestones and has to be paid when a milestone is achieved by the builder. For instance, in one type of construction-linked plan, buyers may have to pay a fixed percentage after every 5th floor is built.

This plan, also called possession-linked plan, carries with itself very little risk as the buyer makes the payment only when the construction process moves ahead. This also gives the builder regular incentives for timely completion of the work.

However, for buyers who opt for a home loan to buy their new house, this type of plan will be an expensive option. Only interest is paid to the bank while the project is under construction. The lender (home-buyer) starts paying the principal amount only after the possession. So, one would end up paying more to the bank.

Time-linked Plan

Under this plan, home-buyers make payments in installments, based on a schedule preset by the developer. This schedule is indifferent to the construction progress.

Some developers may offer discounts up to 8 percent with such a plan.

The risk involved in this plan is that buyers will have to pay their installments even if construction has been slow or irregular.

But, on the upside, lesser down payment is involved in this plan.

Flexi-payment Plan

Under this plan, home buyers will have to pay around 50 percent of the total amount to the builder/developer before the construction starts. This plan is more popularly offered by builders at pre-launches or in case of new launches. Builders take a minimum booking amount, and then buyers get a time period of 3-6 months to pay the previously mentioned 50 percent amount.

Buyers can pay the remaining amount gradually as construction takes place.

Subvention Scheme

Apart from these commonly offered plans, some developers also offer subvention schemes to attract more buyers. Under this scheme, developers partner with banks or Non-Banking Finance Corporation (NBFC) at the time of starting with the project. These financial institutions sanction loans to buyers for the purchase of housing units in that developer's project. After a fixed number of bookings, the partner institution releases the entire loan amount to the developer, who pays the pre-EMI for the mutually decided subvention period.

Home-buyers can benefit from this scheme. Since the builder pays the pre-EMI, home-buyers are not burdened by installments during the construction period.