What exactly is a construction-linked plan?

Purchasing a home is an expensive investment. Most individuals put off their desire of purchasing a home because of the enormous fees involved. Developers, on the other hand, offer a variety of ideas and programmes to entice homeowners. A Construction-Linked Plan (CLP) is one such plan in which partial payments are requested at certain periods.

The construction-linked plan (CLP) is a concept in which three parties collaborate: the bank, the buyer, and the function of buyer and builder are in an alliance. In this case, the bank pays the builder on behalf of the homebuyer on a regular basis until possession is obtained. However, the bank’s payments are connected to the project’s actual construction progress. When a piece of the project is finished or a slab is set, the bank pays the builder the pre-determined amount. the phrase “construction-linked plan” and examines the benefits and drawbacks of this sort of payment structure.

The first 2-3 payments in a construction-linked plan are calendar-based; however, the following amount of the property is paid by the bank in instalments as the building work advances. For example, 10% of the loan amount is disbursed at the commencement of excavation, 10% at the casting of the stilt roof, 5% at the completion of the first floor, and so on. When a customer chooses a CLP plan, these parameters are established and disclosed with him.

The agreement states that 95 percent of the property price is paid to the developer until the project is completed, with the remainder paid by the buyer at the time of possession.

Benefits of the CLP plan

  • The construction-linked plan is best suited to middle-income customers who are unable to make large financial commitments.
  • Why The buyer can book the property at a cheaper interest rate because such properties are under construction and hence less expensive than ready-to-move projects.

Drawbacks of the CLP proposal

  • While the buyer pays the EMIs only after taking possession of the home, he must still pay the existing residence’s rent and the pre-EMI, which is the interest portion of the loan.
  • While such projects are under development, developers may withdraw 90 percent or 95 percent of the funds from the financial institution, delaying the final handover by 2-3 years. Suffering at the hands of the builder, the customer is not only refused the goods but is also forced to pay loan interest.

While the Real Estate (Regulation and Development) Act, 2016 (RERA) has simplified the home-buying procedure, you must still delve deeper into the details. Ensuring that the agreement explicitly states the payment conditions in the event that the job is extended obscenely, otherwise you may wind up paying the EMIs.

Disclaimer: The views expressed above are for informational purposes only based on industry reports and related news stories. PropertyPistol does not guarantee the accuracy, completeness, or reliability of the information and shall not be held responsible for any action taken based on the published information.


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