Do you understand the nuances of your payment plan to your developer? When you buy property and pay by installments, soon after the initial payment you make at the time of booking, you will be expected to make recurring payments to the developer. Here we explain the process of how this works and what you stand to gain or lose under each option.
Time-linked payment plan
Time-linked plans require you to pay installments to the developer based on a pre-determined time schedule, independent of the rate at which the project's construction progresses. This is a contractual commitment you are signing up for, and is non-negotiable.
If your payments are late or if you miss an installment, you can be liable for penalty interest or anything that you might have contractually agreed to as a penalty.
A typical time-linked plan conceptually looks like the following:
- 10% of basic selling price (BSP) at time of booking
- 10% of BSP every quarter thereafter for next 8 quarters
- 10% BSP at time of possession + other dues (such as club membership, development charges if any, parking fees)
The disadvantage with time-linked plans is that you are at the mercy of the developer - even if the project is delayed you are contractually bound to pay your installments. So, effectively you are funding the developer for no noticeable progress, which clearly is not a fair deal to you.
The question to ask is what the developer is doing with your money if it is not going towards the construction or related activities.
Construction-linked payment plan
Construction-linked plans require you to pay installments to the developer based on a pre-determined rate of progress of the project, usually related to construction related milestones. The advantage of such a payment plan is that you pay only when the milestones are being achieved - you can see visible signs of progress, and there is a noticeable correlation between what you are paying for and the development of the project.
Like in time-linked plans, if your payments are late or if you miss an installment, you can be liable for penalty interest or anything that you might have contractually agreed to as a penalty.
A typical construction-linked plan conceptually looks like the following:
- 10% of BSP at time of booking
- 10% of BSP at time of excavation
- 10% of BSP at casting of the ground floor slab...and so on
- Final installment at completion of the roof + other dues (such as club membership, development charges if any, parking fees)
The advantage of a construction-linked plan, as you might have guessed, is that you pay for progress, and are not uselessly funding the developer to do what it pleases with your money.
What if you choose the down payment plan?
The Down Payment Plan requires you to pay the entire price of the property at the time of booking. One possible advantage of this is that you can expect to get a 10%-12% discount on the property by paying the entire amount in full.
However, depending upon the project and the builder, you might be able to negotiate a higher discount. The disadvantage of these plans is that once you have paid the entire money, you are at the mercy of the developer if the project is delayed or postponed.
What happens if you cancel your booking?
Irrespective of which payment plan you choose, the outcome depends upon how helpful the developer wants to be in dealing with your cancellation request. You will likely have to put in your request in writing and then just wait for the developer to respond.
However, don't expect the developer to act quickly. It is not in their interest to do so, because now they have to find a new buyer for the unit that you are exiting.
As far as getting a refund is concerned, you must understand what contractual penalties you might be obligated to pay. In any case, don't expect the developer to pay the pending amount back to you immediately. Chances are you will be made to run around a lot to get anything back from the developer, and the process can take up to a few months.
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