Flexi bargains
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Flexi bargains

Customised home options, with desired floor plans, layouts and fixtures, are the new lures being used by developers to bring in customers.

Rakesh Rai   
  • October 29, 2010  
  • |  

As with all good things in life, a house comes with its set of unsolicited paradoxes. While it offers high financial security, purchasing it can be monetarily draining. Though it's easy to get a home loan, paying the equated monthly instalment (EMI) is a tedious affair.

Still, the benefits outweigh the concerns and so you decide to buy one. Now is a good time to implement the decision given the bevy of bargains flooding the market and the discounts you are bound to land. But wouldn't it be wiser to wait till your next salary increment?

To help you make up your mind, builders have hit upon a novel idea-flexible payment plans. These can be customised depending on how much you can pay in the initial stages. So, in the coming weeks, be prepared to be bombarded with 'No EMI till possession', 'EMI sharing' and 'No EMI, no interest' schemes.

So far, the most popular way of paying for a house has been through a down-payment plan. You make a 10 per cent down payment from your pocket, the home loan takes care of 85 per cent of the cost and you pay the balance 5 per cent at the time of possession. While such a plan ensures maximum discounts for the buyer, it also burdens him with an upfront EMI.

The buyers who have a smaller budget and low risk appetite can opt for a construction-linked plan, wherein you pay in instalments as the construction progresses. The EMI payment starts only after the entire loan is disbursed. However, what works against it is that a borrower has to pay a pre-EMI interest on the money that the bank lends in stages. This means that the property under construction may not work out to be as cheap as you had thought, especially if you are paying rent till the project is completed.

What is Flexi Payment?

  • You pay 10% at the time of booking.
  • A further 10% is paid within two months of the date of allotment.
  • Up to 70% is paid in tranches as the construction progresses.
  • The balance 10% is paid at the time of possession.
To overcome the drawbacks of both these types of plans, developers are now offering flexi plans. Under such schemes, a buyer pays about 10 per cent of the property value at the time of booking (similar to a down-payment plan), but in the first 30-60 days, he is required to pay only 30-40 per cent of the cost (unlike 85 per cent in the case of a down-payment plan).

The schedule for the balance payment is similar to a construction-linked plan. So the initial EMI burden is low. However, the downside is that builders are not willing to offer as high a discount as for a downpayment plan. For instance, there is a 6-7 per cent discount on the latter scheme but under a flexi plan you will get a 3-4 per cent discount.

However, this is better than a construction-linked plan, which offers no discount. Also, most developers have tied up with banks, so that you don't have to pay a pre-EMI interest for the partial loan that the bank disburses in the first 60 days. This is only charged as and when the bank disburses the rest of the loan.

Flexi plans are also beneficial if you are an investor planning to sell the property within a couple of years. In such a case, you wouldn't have to pay a sizeable amount as EMI (as you would under a downpayment plan), and the pre-EMI interest would also be low compared with a construction-linked plan. Buyers have begun to opt for flexi plans as these don't exert too much financial strain. The success of this innovative plan has prompted developers to widen options for buyers in other areas too.