Difference between Various Payment Plans
People, while buying any property often get confused between subvention scheme, CLP (construction linked payment plan) and PLP (Possession Linked Payment plans). To solve this confusion we present before you various payment plans and their details. Please have a look at the major kinds of schemes:
Subvention Scheme: Under the subvention scheme, a builder/developer ties up with banks or Non Banking Finance Corporations [“NBFC”] at the time of starting a project. The financial institute sanctions home loans to buyers for purchase of a property. After a set number of buyers, the banks release the entire loan upfront to the developer. The builder pays the pre-EMI for the mutually decided subvention period. The major and obvious advantage for the home buyer is that he/she is not burdened by EMIs during the construction period. If he/she is living in rented house, then there is no double pressure of paying EMIs as well as house rent. One should avail this scheme if the chance of the developer missing the deadline is low and trust on builder is high.
Construction-Linked Payment Plans: A CLP plan allows an investor the freedom to avail a loan from a bank of their choice, that too if required. The payments are made according to progress in construction of a site. This plan reduces risk as one has to make a payment only after the builder reaches a new milestone, also with this plan people enjoy full tax benefit. One should take this plan if construction is in the initial phases.
Possession-Linked Payment Plans: PLP allow buyers to make a major portion of payment on possession of the unit. This payment plan eradicates the risk of the builder of not giving the possession of a project on time, and of the builder going bankrupt as one does not have to pay for the property till it is not ready. This plan should be availed if an investor is ready to pay a small premium over mitigating risk of property possession.