Deferred payment plans may come with a cost, which may not be immediately visible.
Real estate developers are increasingly offering flexible payment plans, which involve low booking amounts and deferred payments.
Their goal is to sustain sales momentum without reducing headline prices.
"These incentives reflect moderation after a strong sales cycle, and affordability pressures on buyers, leading to them turning more selective, rather than market distress," says Ankita Sood, national director, research, Knight Frank India.
"These offers are aimed largely at price-sensitive buyers," says Rahul Phondge, chief operating officer - residential and chief business officer, ANAROCK Group.
Flexible payment plans may take the 10:90 or 20:80 form. They allow buyers to pay a small booking amount upfront, with the balance paid in instalments linked either to construction milestones or possession.
"This structure helps buyers manage cash flow, as payments are spread over time and, in construction-linked plans, move broadly in tandem with the project's progress," says Phondge.
These plans lower the initial financial outgo for home buyers. "Such plans prevent a large amount of capital from being blocked at the outset," says Phondge.
Deepak Mishra, director, residential transaction services, Colliers India, highlights that they give buyers time and flexibility to manage payments.
"Salaried buyers can preserve liquidity for emergencies, investments, or children's education," says Shweta Rajani, associate director, Anand Rathi Wealth.
Deferred payment plans may come with a cost, which may not be immediately visible. Developers may charge a slightly higher base price than under a regular plan.
"The flexibility may be embedded in the property price, raising the overall cost by 2-5 per cent," says Rajani.
Phondge adds that buyers choosing such plans may also forgo the 8 to 10 per cent savings often available under down-payment options.
Past experience with such schemes points to additional risks. Project delays have previously left buyers paying rent while also bearing loan obligations.
"In some subvention schemes, developers had promised to pay EMIs until possession but later defaulted, leaving buyers with accumulated interest and bank dues," says Rajani.
Flexible payment plans are better suited to end users who need to manage instalments or loan repayments alongside other commitments such as existing loans, systematic investment plans (SIPs), household expenses, and children's education costs.
"They may also suit financially comfortable buyers who are temporarily short of liquidity," says Akash Pharande, managing director, Pharande Spaces.
"Investors may also gain from smoother cash-flow management and potentially better returns," says Mishra.
On the other hand, buyers who can afford a down payment or outright purchase should avoid flexible plans because the convenience comes at a cost.
"Those with ready funds should negotiate on price instead," says Pharande. Phondge says short-term investors should also be cautious, as higher effective costs can reduce their profits.
Before choosing such a plan, buyers should compare the overall cost with that of a down-payment option for the same unit.
"They should watch for higher base price, premiums, and financing-linked charges that may offset the benefit of deferred payments," says Kanwar Bhatia, executive director, Urban Money.
The payment schedule requires scrutiny. Buyers should examine what triggers each instalment and whether payments are linked to time or construction milestones. Time-linked plans require payment even if construction does not progress as scheduled.
"Construction-linked plans are generally a more prudent option because payments are aligned with project progress," says Bhatia.
The sale agreement is critical. "Buyers should read the complete sale agreement before signing, as anything not written into the contract is not binding," says Pharande.
"Buyers should ensure broad parity in interest provisions for buyer and builder defaults," says Raheel Patel, partner, Gandhi Law Associates.
"In some projects, large instalments are pushed to the final stages, and handover is linked to additional or disputed demands," says Patel.
Project delays can place significant stress on cash flows. Buyers may remain locked into instalments even when possession is postponed.
"In extreme cases, their money may get stuck in stalled projects, making recovery slow and difficult," says Patel.
Prudence requires a review of the project's RERA registration and approvals. Buyers should also assess the developer's credibility, financial stability, reputation, and delivery record.
"The decision should be based on total affordability and developer credibility, not merely a low initial payment," says Rajani.
Deferred payment and subvention models may carry conditions different from conventional home loans.
"Buyers must check whether the payment plan is approved by banks," says Mishra.
They should check whether the lender's disbursal schedule matches the developer's payment milestones.
"Any mismatch between bank disbursals and builder demand schedules can create funding gaps and unexpected pressure," says Bhatia.
Borrowers, he adds, should also understand when their repayment obligations begin, whether they must service pre-EMIs during construction or the developer will service interest for a limited period, and when the full EMI burden shifts to them.
Tripartite agreements, liability clauses, and default provisions must be reviewed carefully.
If the builder fails to deliver possession on time or materially alters the deal, RERA allows the buyer to exit and claim a refund with interest.
"It also allows the buyer to remain in the project and claim interest for each month of delay, plus compensation," says Patel.
Consumer courts can intervene where an agreement is one-sided and amounts to an unfair trade practice.
"Both RERA and the Consumer Protection Act make it clear that these remedies are in addition to normal civil suits, so buyers are not locked into a single route," says Patel.
Criminal remedies may also be invoked in fraudulent or Ponzi-type schemes involving cheating or money-laundering allegations.
Finally, a low booking amount should not drive the purchase decision. "Buyers should ask a qualified financial adviser to map the full financial picture," says Pharande.
Disclaimer: This article is meant for information purposes only. This article and information do not constitute a distribution, an endorsement, an investment advice, an offer to buy or sell or the solicitation of an offer to buy or sell any securities/schemes or any other financial products/investment products mentioned in this article to influence the opinion or behaviour of the investors/recipients.
Any use of the information/any investment and investment related decisions of the investors/recipients are at their sole discretion and risk. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Opinions expressed herein are subject to change without notice.
Feature Presentation: Aslam Hunani/Rediff
