Real estate: Should you opt for a 'book now and pay later' scheme?
Jul 18, 2016
Source : ET


Pramod Kumar lives on rent in a metro and wants to buy an apartment. Recently, he came across an ad for homes available under a 15:75:10 payment plan. Also known as subvention schemes, these are bank financing for home loans, where the borrower pays only 15% of the property value at the time of booking. The lender pays 75% at various stages of project completion and the borrower pays the balance 10% at possession. There is also a No EMI for 24 months offer. Should Kumar opt for it? 

In effect, Kumar will pay the booking amount and the payout at the time of possession. A substantial percentage value in the middle is paid by the lender as a loan disbursement, linked to construction. He will have to sign a tri-partite agreement with the lender and the builder. He gets time to accumulate funds till the time of possession and his EMI starts only after possession. All this sounds quite good. However, what he doesn't realise is that 'No EMI for 24 months' does not mean there is no EMI outgo. It merely means that the EMIs get paid by the builder on behalf of the buyer. As a buyer, Kumar would be held liable and his credit score would be adversely impacted if the builder were to default on the EMIs. 

In case the project gets delayed, Kumar will be paying the EMI even before he gets possession, which means he will end up bearing both rent and EMI, stretching his finances. Hence, a 'No EMI until possession' might be a better bet, so that development risk is completely transferred to the builder. Kumar should also cross-check the cost of the property under all the payment plans to ensure that variations are not high. 

In this day and age where project delays and loan defaults by developers have become the norm, it is important to tread cautiously on such schemes. Therefore, while the offer may appear lucrative, it is important for Kumar to be mindful of the risks involved. He should read the fine print of the agreement and look out for credible builders (their track record) with the financial capacity to deliver the project. 

Latest Realty News

Jul 15, 2016
CHANDIGARH: The Centre has made a provision of Rs 66.65 crore for Haryana under the Pradhan Mantri Awas Yojna for 2016-17.
Jul 13, 2016
Following the NDA government’s “Ease of Business” mantra, the environment ministry has proposed that the entire construction sector could be exempted from mandatory environmental clearances
Jul 08, 2016
MUMBAI: Rising affordability concerns and a sluggish job market continued to push home prices downwards, according to a report released by Nomura. At all-India level house price inflation continued to moderate at a fast pace and eased to its lowest recorded level of 5.2% in Q1 2016, as per the Reserve Bank of India's housing price index (HPI). House price inflation was recorded at 9.8% in Q4 2015.
Jul 04, 2016
The state police has directed police stations across Maharashtra to register complaints against errant builders who cheat flat buyers and violate building norms. Housing experts have welcomed the move--termed by CM Devendra Fadnavis as "a good decision" -but which the real estate industry finds 'disturbing'. In a circular issued last week, special inspector general of police Prabhat Kumar instructed police commissioners in the state to take action according to the provisions of law when people f
Jul 02, 2016
NEW DELHI: A group of home buyers has claimed that the draft rules for the Real Estate (Regulation and Development) Act circulated by the government recently ignores the interest of buyers in ongoing housing projects and should be reconsidered.
Jun 30, 2016
New Delhi: Real estate industry bodies on Wednesday said housing sales are expected to improve following implementation of Seventh Pay Commission recommendations as prices have fallen in last few years because of a slowdown in the property market.
Jun 29, 2016
NEW DELHI: Developers may have to pay 11.2 per cent interest to buyers for delay in handing over apartments and homes, according to draft rules unveiled by the government, a step seen as bringing relief to homebuyers reeling under the impact of delayed projects and mounting loan liabilities.
Jun 27, 2016
If you have bought a property worth Rs 50 lakh or more, according to income tax rules you are liable to deduct a tax at source, or TDS, at the rate of 1 per cent from the payment to the seller.
Jun 24, 2016
NEW DELHI: Reforms in FDI policy and relaxation of norms in Real Estate Investment Trusts (REITs) will benefit the realty sector, especially the commercial segment, property consultant CBRE today said.
Jun 24, 2016
Pune: Not just individuals and commercial organizations, even government agencies default on property tax payment.

Latest Realty News Of State

Realty Talk's