The real estate sector is slowly saturating, and developers are coming up with attractive offers to convince customers to invest in their projects. Until recently, the most commonly used method of payment was Construction-Linked Payment (CLP). But because it has been biased towards the developers, many buyers have been opting for the Possession-Linked Payment (PLP) plan. Let’s go over the five things you should know before opting for this type of payment plan.
PLP Burdens the Developer, Not the Buyer
As per the PLP scheme, the developer bears a greater percentage of financial risk. Make sure that the developer has sufficient funds to complete the project without any hiccups. You should also check that the builder has got the necessary approvals from the local authorities. If the builder begins the development without the proper approvals, chances are, you might lose some of your money or get a delayed payment.
The Difference Between CLP and PLP
The overall investment of the property is similar under both, the CLP and PLP schemes. If there is a price difference between both the plans, the developer or builder incorporates the remaining funding cost in your PLP plan. If you are faced with such a situation, make sure you decline the offer. Such developers usually size up a premium of 10-15% above the regular rates while proposing a PLP scheme.
Just Another 80:20 Scheme?
Some of you who are unaware of the CLP or PLP plans, might assume they are the government-banned 80:20 scheme, but with different credentials. However, that is not the case. In the CLP plan, the initial cost is made from your own pocket, whereas the bank pays the remaining balance directly to the developer or builder. Under a PLP plan, the bank doesn’t play any role, and there is direct financial communication between the builder and you.
Always Read the Document Before Investing
As a buyer, it is essential for you to read the offer document thoroughly before investing. If you do not understand some of the verbiage in the document, make sure you get it clarified by an expert, as such a neglect can lead you to losing a lot of money. Also, if the builder turns out to be a defaulter in the future, there are chances that you may lose your initial advance of 20-25%.
Always Opt for the Pure PLP plan
As developers have an unquenchable thirst for money, they will try to convince you to opt for the CPL scheme. Here, you will have to take a bank loan, and the developer will pay the required amount till you are ready for possession of your property. However, such agreements are risky as the developer may not remunerate the interest. And if you do default on your loan from the bank, the accountability is wholly yours. A pure PLP plan means that there should be only two payments made from your side – one during the time of booking and the other after possession. This will protect you from getting duped, and will allow you to take control of your finances.