Choose your festive schemes before buying a home

Festivals and schemes

It is the festive season painted with rainbow colours in India. If you are a potential home buyer, then be sure to be tempted by dozens of festive discounts and offers from the builders. Along with the home, there awaits a gamut of freebies and discount offers and innovative schemes and strategies to lure you into buying a home for yourself.

As you are about to be flowered with waivers and offers, you should be able to know which one to choose from them and not just to get swayed by them. Apart from schemes and cash discounts, free trips to exotic locations, free car parking, free registration, gold coins, accessories like TV or air conditioner, etc are offered to the potential buyers by the developers.

However, rather than being swayed by the show, many question the actual profit from such transactions. Skeptics point out that waivers, discounts and freebies are aimed at generating a feel-good factor and showing the customer a rosy picture that may not be so rosy in reality.

20:80 scheme

One of the much tested scheme is the 20:80 scheme, where the buyer pays 20% of the total cost upfront and the balance at the time of possession. The subvention scheme is marketed as “No EMI for 2 years”. According to this scheme, after an individual applies for a loan for a property under construction, for the two years of the loan period, the concerned person need not pay any pre-EMIs and all the interest for these first two years will be paid by the developer.

The first glance shows that when you are offered the scheme, you own a property without having to pay any interest for two years. However, there deeper waters underneath. If you are being offered the scheme, you may actually be paying more for a house than another customer who has not been favoured by the scheme.

The builder generally sneaks in the amount that he is paying into the financing costs. Most builders offer the 20:80 scheme when they are cash strapped. The units under the scheme are usually priced at a higher value, as opposed to the customer’s belief that he is paying less for one.

Construction-linked Payment (CLP)

The Construction-linked Payment Plan (CLP) is a favourable one for you. Under this plan, you need to pay installments to the developer based on a pre-determined rate of progress of the project, usually related to construction-related milestones.
If you are endorsing the scheme, you see visible signs of progress, and you pay  according to the development of the project.

However, the CLP does not guarantee against project delay. Although the scheme is marketed as you pay what you see them build, in reality, developers can manipulate the construction process. They can take their own time once 85% of the payment is made and erect a basic skeletal structure, to be able to raise construction-linked payment.