Friday, 22 July 2016

Book Now Pay Later- A Boon or a Bane

When we come across a desire to buy a house or own an apartment something that people really look as is the offers that are provided, and one of the offers is that of EMI wherein a person books a flat with a small down payment amount and then the remaining money at various intervals with the final payment at possession.

There are lot of people who jump to this option. The payment scheme of 15:75:10. Initially the borrower pays only 15% of the total cost, 75% is paid by the lender at various different intervals and at the possession of the property the remaining 10% is cleared off by the borrower.

If we just analyse a bit deeply it’s the booking amount and the pay-out at the time of possession that’s paid by the borrower. A substantial percentage in the middle is being paid by the lender as a loan which needs to be reimbursed later. There is a tri-partite agreement that needs to be signed by the borrower with the lender and the builder. He gets time to accumulate funds that the bank has being paying for the borrower till the time of possession of the flat and the EMI starts only after possession. All this sounds good and interesting.
However, there is something to be looked into deeply which is not understood. 'No EMI for 24 months' does not mean there is no EMI at all. It merely means that the EMIs get paid by the builder on behalf of the buyer. As a buyer, one would be held liable and his credit score would be adversely impacted if the builder were to default on the EMIs.
There is something that adds on, in case of a delay in getting the possession, then the expenses will even double further which will make the buyer need to stretch his finances. Hence one should try seeking for a 'No EMI until possession', so that development risk is completely transferred to the builder. They need to be a cross-check done on the cost of the property under all the payment plans to ensure that variations are not high.
We are in an era where project delays and loan defaults by developers and builders have become the norm, it is therefore important to tread cautiously on such schemes. Therefore, while the offer may appear lucrative, it is important to be mindful of the risks involved. Get to the credible sellers and make your investment on apartments and flats at safe hands and in trustworthy manner.