Developer Subvention or a Construction Linked Plan - What is better?
Developer Subvention:
Pros:
- Lower EMI burden during the construction period, as the developer pays the interest on your loan.
- More flexible payment plan, as you only start paying EMIs after possession.
- Can be a good option if you are short on funds and need time to arrange the down payment.
Cons:
- Higher interest rates compared to CLPs, leading to a higher overall loan cost.
- Developers may default on interest payments, leaving you with the burden.
- You lose control over the loan and the developer may delay the project.
Construction Linked Plan (CLP):
Pros:
- Lower interest rates compared to Subvention schemes, leading to lower overall loan cost.
- Greater transparency and control over the loan, as you directly pay the bank.
- Less risk of defaults, as the developer receives payments based on construction progress.
Cons:
- Higher EMI burden during the construction period, as you start paying pre-EMIs on the disbursed loan amount.
- Requires a larger down payment upfront.
- May not be suitable if you have limited funds.
Here are some additional factors to consider:
- Your financial situation: If you are short on funds, a subvention scheme can offer some relief. However, if you can afford higher EMIs, a CLP is a better option in the long run.
- The developer's reputation: Choose a developer with a good track record and financial strength to minimize the risk of defaults.
- The project timeline: If the project completion date is uncertain, a subvention scheme may be less risky.
- Your risk tolerance: If you are risk-averse, a CLP is the safer option.
Ultimately, the best way to decide is to consult with a financial advisor who can assess your individual circumstances and recommend the most suitable option.