Among the various payment options offered by the builders to attract home buyers, Construction-Linked Plan (CLP) remains the most popular.
The construction-linked plan is a concept where the bank, buyer and builder are in an alliance together, and bank disburses the amount to the builder on behalf of the homebuyer until the possession. However, the disbursements made by the bank are linked with the construction progress of the project. Every time a section of the project is completed or a slab is laid, bank disburses pre-decided amount to the builder.
In this, the first 2-3 installments are calendar based; however, the subsequent amount of the property is paid in parts as the construction work progresses. Like, a 10 percent of the loan amount is disbursed on the start of the excavation, 10 percent on the casting of the stilt roof, five percent on the completion of the first floor and so on.
The arrangement is made in a way that 95 percent of the property price is paid to the developer till the completion of the project, developer and the remaining five percent is provided by the buyer on the possession of the unit.
Advantages of CLP
- The payment plan best suits the middle-income buyers who are not in a position to make big financial commitments
- The buyer begins to repay the amount to the bank only after the possession of the property
Disadvantages of CLP
- Although the buyer pays the EMIs only after the possession of the property, the rent of the current residence and Pre-EMI, the interest component of the loan, have to be paid
- Developers may draw 90 percent or 95 percent of the amount from the financial institution and delay the final handover of the project by 2-3 years. Suffering at the hands of the builder, the buyer is not only denied the product but also has to bear the burden of loan interest