Financial
Construction-linked payment plans, and how to read the schedule
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In short
A construction-linked payment plan ties each instalment to a defined stage of construction, so you pay as the building rises rather than on fixed dates. RERA caps how much a developer can collect before a written, registered agreement, and the shape of the schedule after that is a genuine negotiating point.
Key facts
- Basis
- Payments tied to certified construction stages
- Statutory limit
- RERA caps collection before a registered agreement
- Alternative
- Time-linked plans, tied to dates rather than progress
- Main buyer risk
- Front-loaded schedules that outrun actual progress
- Interacts with
- Staged loan disbursement and pre-EMI interest
The payment schedule is the part of an under-construction purchase buyers pay least attention to and live with longest. It determines when your money leaves, how much interest you pay before you own anything, and how exposed you are if the project slows.
It is also more negotiable than most buyers assume, particularly on inventory that is not selling quickly.
How a construction-linked plan works
The schedule sets out stages — excavation, foundation, each floor slab, finishing, handover — and attaches a percentage of the price to each. As the developer certifies a stage complete, that instalment falls due.
The logic is that your money goes in as value is created. If construction stops, further instalments stop with it, which limits how much of your money is tied up in a stalled project.
What RERA fixed
Before RERA a developer could collect a substantial proportion of the price on the strength of a booking form. The Act caps what can be taken before a written agreement for sale is executed and registered.
That single provision does more for buyers than the schedule itself, because it forces the agreement — with its carpet area, its specification and its declared completion date — to exist before significant money moves.
- Collection before a registered agreement is capped by statute.
- The agreement must state the carpet area, the specification and the completion date.
- Insist on the registered agreement before paying beyond the permitted amount.
Reading a schedule critically
Two schedules can total the same price and expose you very differently. The question is how much you have paid by the time the building is at a given stage.
- Add up the percentage payable by the time the structure is complete. A high figure means you are funding the finishing work in advance.
- Check how much is held back to handover. A meaningful final instalment is your leverage at possession.
- Check what happens if a stage is delayed — does anything protect you, or does the schedule simply pause?
- Check whether instalments are tied to certified stages or to dates. A time-linked plan can fall due whether or not the building has moved.
- Check the interest rate for late payment by you, and compare it with the compensation payable for delay by the developer.
How it interacts with your loan
Your lender disburses against the same stages, so the two schedules should align. Where they do not, you fund the gap yourself.
Every disbursement also increases the pre-EMI interest you pay through the construction period. A front-loaded schedule therefore costs you twice: more of your money committed earlier, and more interest accruing on it before you own anything.
Subvention arrangements
Schemes where the developer bears the interest until possession appear periodically under various names. They can genuinely help cash flow, particularly if you are paying rent at the same time.
But the loan is in your name and the liability is yours. If the developer stops paying, the lender comes to you, and your credit record is what suffers. Read who owes what to whom, and what happens on delay, before accepting one.
- The borrowing is yours regardless of who services it.
- Establish what happens if the developer stops paying.
- Establish what happens if possession is delayed beyond the scheme period.
- Compare the all-in cost against a plain construction-linked plan.