

Own a home with the right payment plan
buyers can book a property by paying just 5-20% upfront, with the bulk of the payment deferred until possession. But before you fall for the “affordable home” pitch, understand how the 20:80 subvention scheme for under-construction projects works.Here, buyers make an initial low payment of 20% of the house value from their savings, while the remaining 80% is paid later, as the building nears possession3-5 years later.Buyers mistakenly believe there is no payment due until the possession date.
But, in the background, the developer has already secured a bank loan in the name of the flat buyer before the property registration.So why isn’t the loan issued directly to the developer? This is because of the interest rate differential between an individual loan and a corporate loan for a developer. In such a scenario, the buyers are happy as they do not have to service any loan, and yet they are building an asset and delaying the EMI until the next three years.While buyers assume there is no payment, the interest on the loan the bank has disbursed to the real estate developer has already started accumulating during the construction period.
Only the buyer’s loan repayment has been delayed.“This scheme is akin to buy now, pay later,” said Tivesh Shah, chief executive and founder, Tru-Worth Finsultants. While one pays a low amount upfront to benefit from property price escalation, there may be some trade-offs one needs to be mindful of.
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