Friday, August 31, 2018

What are the various payment plans currently being offered for real estate residential projects in India?

Author: Sachin Gupta | Find me on Twitter

Booking an apartment with a real estate developer is not easy. While on one hand there is this question of finding the right property developer with sound track record and on another hand there is this nagging question about housing prices and payment plans. In last few years, real estate projects and in particular residential projects have been launched with attractive payment plans in order to attract end-users and investors to book an apartment. The creative and financial engineering skills of real estate developers and banks are showcased with every new type of payment plan.

At the end of the day each payment plan which is designed reflects the existing market sentiment. If market sentiment is good and there is growth in the sector, then existing payment plans can prove to be sufficient. However, in times of bad market sentiments, there is much more pressure on real estate developers and bankers to sit and devise new attractive payment plans. In recent months, some of the new payment plans which have been introduced in the market are 80-20 scheme, rent on home buy, etc.

In this section, we analyze the various payment plans on offer and their implications for customers.



Down payment plan
A typical down payment plan looks like this:

Down Payment Plan [(8 % Rebate on Base Selling Price (BSP)]
  • At the time of Registration / Booking - 10% of BSP
  • Within 45 Days From date of Registration / Booking - 85% of BSP + Car Parking + DC +Club Membership + PLC (if any)
  • On Possession - 5% of BSP + Other Additional Charges etc.

In a typical down payment plan, one can get a discount on market Base Selling Price. The discount offered can be negotiated with the developer and generally ranges between 8-10%. Now, the question to be asked is, why would a developer offer this 8-10% of discount? Well, if a developer borrows money from bank or other financial institutions, then in that case, the developer ends up paying 12-15% yearly interest. And in down payment plan, a customer is willing to pay the entire apartment cost within 2 months at a discount of 10%. It’s a plan which suits the real estate developer most. However, investors with large amount of cash do also take considerable interest in down payment plans. Because where else can they park their unreported income but for real estate.

For end-users, this plan can prove to be risky in case the project is delayed unexpectedly.


Construction linked plan
A typical construction linked plan looks like this:

Construction/Time Linked Installment Plan
  • At the time of Registration / Booking* Rs. 3.0 Lac
  • On Allotment of Unit / within 45 days of booking* Completion of 15% of BSP
  • On Start of excavation / within 90 days of booking* Completion of 25% of BSP
  • Completion of basement roof slab / within 120 days of booking* 7 . 5 % o f B S P + 50% of DC
  • Completion of 1st Floor roof slab / within 5 months of booking* 7 . 5 % of BSP + 50% of DC
  • Completion of 4th Floor roof slab / within 7 months of booking* 7 . 5 % o f BSP + Car Parking
  • Completion of 6th Floor roof slab / within 9 months of booking* 7 . 5 % o f BSP + PLC
  • Completion of 8th Floor roof slab / within 11 months of booking* 7 . 5 % o f BSP
  • Completion of 10th Floor roof slab / within 13 months of booking* 7 . 5 % o f BSP
  • Completion of 12th Floor roof slab / within 15 months of booking* 5 % o f B SP
  • Completion of 14th Floor roof slab / within 17 months of booking* 5 % o f B SP
  • Completion of Top Floor roof slab / within 18 months of booking* 5 % o f BSP
  • On Completion of Brick Work in Apartment 5 % o f BSP
  • On Completion of Plaster Work 5 % o f B SP
  • On Possession 5 % o f B S P + IFMS + Club Membership + Other Charges

In a typical construction linked payment plan, one pays a booking amount of 3 to 5 lacs and the apartment is booked. Thereafter, installments are paid as per the construction of the project. This plan safeguards buyer’s interest in case the project is delayed since installments are paid as per the construction schedule of the project. Most banks also offer home loan to individual home buyers on this payment plan in order to make sure that funds which are provided to developer as part of installment actually go in the development of the project. This is by far the most prevalent plan in the industry today.


Flexi payment plan
A typical flexi payment plan looks like this:

  • At the time of Registration / Booking 10% of BSP
  • Within 30 Days From date of Registration / Booking - 30% of BSP + Car Parking + DC +Club Membership + PLC (if any)
  • Within 90 days from date of registration/booking – 30% of BSP
  • Within 180 days from date of registration/booking – 25% of BSP
  • On Possession - 5% of BSP + Other Additional Charges etc.

Just like down payment plan, flexi plan offers discount on base selling price usually in the range of 5%. As the name suggests, this plan provides flexibility to investor in paying the apartment cost over a period of time. Again, it is not suited to end-users who normally opt for construction linked plan. Most banks also do not offer loan on flexi payment plan.


20-80 payment plans

20-80 schemes are a new phenomenon. What it means is that one can pay 20% now and remaining 80% at the time of possession. However, the price per square feet for 20-80 schemes is much higher than the usual construction linked plan. As a buyer, it might look attractive on the surface, but one must be careful in understanding the price differential between a 20-80 scheme and a construction linked plan scheme. 

Even though, in 20-80 schemes, the pressure is on the developer to complete the project on time but there is all the likelihood that prices for 20-80 schemes will be much higher. The hidden point to understand is who is the paying the 80% of apartment cost during the construction period? It will certainly not be a bank, or the developer. Ultimately, the amount is passed on to the customer in the form of higher base selling price. Therefore, before, one jumps on to these schemes, check the price differential.
According to some media reports, Reserve Bank of India (RBI) has banned the 20-80 schemes.


Rent on home buy plan

Recently, some developers have launched rent on home buy. What it means is that if you book an apartment in the under-construction project with a particular developer, then developer agrees to pay the rent for your current accommodation if the project is delayed and in some cases the developer agrees to pay the rent for the entire construction period of the project. The idea is to ease the financial crunch a buyer faces when he/she pays equated monthly installments (EMIs) and rent during the period of construction.

Experts believe that such assurances come with a cost, but the builder is unlikely to disclose two sets of rate cards to potential customers — one that includes the rental offer and the other without it. Just like the 20-80 schemes, one must be careful in opting for these schemes as the pricing will be much higher than the usual construction linked plan.

At the same time, direct discount is far better as it is simpler to understand. Then, there is the time value of money you are committing over the period of construction.


Which payment plan one needs to choose?

For an investor with huge cash pile, it may make sense to go for down payment or flexi payment plans. But for, end-users, it is always advisable to stick to construction linked plans because of transparency and ease in availing home loans.








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Saturday, August 25, 2018

What are the various kinds of documents that are required to avail home loan in India? What are the documents a salaried class, self employed, businessman needs to present for home loan in India?

Author: Sachin Gupta | Find me on Twitter

As per the recent report by National Housing Bank titled “Report on trend and progress of housing in India 2012”, the following observations were made.

The urban population of India has been growing at a rapid pace. As per the Census 2011, 31.16 per cent of the total population is in the urban areas. The shortage of housing units for the urban areas for 2012 is estimated at 18.78 million units.

With time, there has been expansion and improvement in the housing finance market by way of various financial reforms; however the housing loans as a percentage of GDP have remained at around 7 percent, significantly lower than the levels achieved in most of the developed countries.

During the financial year 2011-12, housing loan which is disbursed to individuals across India stands at Rs. 68221.12 Crore. Out of which about 71.34% was used by individuals for acquisition/construction of new houses, about 2.63% for repair of existing houses, and about 26.03% was used for purchase of old/existing houses (resale properties). The housing loan availed by individuals across India continue to increase year on year by an average of about 20%. All these numbers suggest that home loan is a key factor when an individual goes out to buy home.

However, before one approaches the bank or housing finance companies for housing loan, he/she needs to have the papers in order. Papers about income proof, bank statements, PAN Card, etc. What are the documents that are required to avail home loan? This is a question many of you are confronted with. And therefore, we have put together a comprehensive list of documents that are required for home loan. Find it below:






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Monday, August 20, 2018

Buying your second property? Here is the checklist

Second home, a nomenclature designated to vacation house, investment house, or simply a home for the extended family. Whatever name you call it, second home market is developing as a cash cow for the investors and developers alike. Let us look into the concept of home away from home in some more detail and see a checklist to help make it a profitable venture without burning a hole in your pockets.

Buying a second house is very similar to buying the primary residence to some extent. However the dynamics might change depending on the purpose for which the property is bought. The purchase of such houses depends mostly on disposable income, as they are bought to match the lifestyle choice more than the primary need. Thus a lot of other things like purpose, affordability, and location etc. come into the picture.

For someone planning to buy a second house, hundreds of things need to be considered. It has been observed that it all comes down to a few basic points like purpose, affordability, location, and some other similar factors.



If you are struggling with the decision of whether or not to buy a second house, here is a checklist of decisions that you will have to encounter in order to take a sound decision. Give them a thorough thought before you go ahead and buy a house.


  • Buy an age friendly house

Investing in a retirement house is also a very common thing. If that is your plan and you have decided on living in the second house, opt for an age friendly house. The amenities offered by the project will play a major role here. For a house that you plan to retire in, it should have all the care facilities, ATMs, shopping complexes, etc. in close proximity.

In India, places like Pune, Bangalore, Chennai, etc. are seen as age friendly cities. So if you plan on retiring in comfort, buy an apartment in Bangalore or opt for a house in Pune or Chennai.


  • Think about the location 

It is one of the main considerations that second-home buyers take. The first part is to decide whether to invest in your city or buy a house elsewhere. Factors like safety, property values, rate of returns, etc. hold importance in deciding the location.

For those looking to buy house in the same city, pointers like purpose, location, and neighborhood plays a major role.

If you plan to buy a house for investment purposes, go for areas near metro routes or high on physical infrastructure front. In a country like India, where the real estate developments are on an all-time high, there are a number of profitable options available to you as second house destinations.


  • Purpose of the second house

The purpose of buying a second house should be clear before you make the investment. Decide whether you are looking for retirement house, vacation house, or for investment needs. The location, price of project, and future of the property depends on this choice.

When buying house for vacation, the factors like returns, neighborhood etc. are overridden by luxury, comfort, and status-quo. And when you buy a house for investments, the exact opposite happens.


  • Finances 

The main concern when buying a second property is Finances. If you already have the first property going on EMI, it is important to decide whether you want the second property on EMI too, or you want to pay the loan off on the first one and start a fresh loan scheme.

The affordability should always be given a priority. Avoid keeping both the property on loan. Have a good portion of the income with yourself to handle any exigencies with ease.


  • Decide what happens with the old house

It is closely related to the purpose point. Before you buy the new house, decide what you are going to do with the old one. It is seen that people often live in the new house and put the old one on rent. Do proper house-benefit analyses before you decide on something. The pricing and EMI is the first thing that will directly affect this decision.

Before you finalize something, work on the tax benefits and insurances, to get a clearer picture of what is beneficial for you.


  • Land vs. Apartment

Another important decision to take is Apartment vs. Land analysis. People who have already acquired a piece of land prefer to buy an apartment as their second house, and vice-versa. Again factors like purpose and affordability, finances play a major role here.

Along with huge tax benefits and a place for retreat or simply a source of extra income, second homes offer a number a benefits to the owner. However, the intensity of decisions in terms of how crucial they are increases in the second time round. Before you start searching for properties, go through the checklist and take a calculated decision.

This is a guest post by Tripti. Tripti writes on the behalf of 99acres.com. Her articles talk about new developments in the real estate industry. She is an avid fiction reader, craftsman and a keen observer. Being someone who just observes without having a point of view, she keeps herself updated in real time. You can reach her on LinkedIn.


Monday, August 13, 2018

Looking to construct your own house on a given piece of land? Pay attention to stages of construction and the cost part of it.

Author: Sachin Gupta | Find me on Twitter

Planning to build your home on a piece of plot? What are the things that one needs to keep in mind before embarking on a year long journey of construction and dealing with multiple contractors, suppliers, etc? Surely, as an owner of the plot, you would have got multiple offers from architectural firms, contractors about the cost estimate. However, before even talking to these firms, one need to do his/her cost estimation.

Constructing one’s house is not easy because of the nature of the work. One needs to work/deal with professional firms such as architects, contractors and at the same time deal with labor. Therefore, you not only need to plan the stages of construction but also the costing part of it. Doing the cost analysis helps you in analyzing what you need to build and what you can postpone for future dates. For example, if your budget is limited, then in all likelihood, you may not go for modular kitchens, lavish bath fittings, etc.

Here we present the quick ‘to do’ list for you to arrive at a guesstimate of cost that you may incur during the construction of your dream house. This will help you in planning your construction stages as well as cost part of it.



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