
> Loan comparison: CLP on Tranche EMI vs. Downpayment with discount 



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July 28 2010, 09:43 PM  #1  

Loan comparison: CLP on Tranche EMI vs. Downpayment with discount
I want some accurate information from people who have good experience of this.
My understanding is that Tranche EMI is meant for Construction Linked Plan (CLP)  when for some reason (i.e. dont trust builder) you are wanting to go only for CLP.But on the basis of your salary, you can afford the full EMI calculated for your entire loan. So your loan is released as per CLP demand letters only, but you start your full EMI from day 1. In the beginning, you pay back a big chunk of principal disbursed and of course the full interest of the disbursed amount. When your full amount is disbursed in 3 years time, you have already paid back some of the principal. So your EMI is based on a total principal sum which is less than full sum of CLP. For example, suppose full CLP price is 30L. You go for tranche EMI, they release 3L every 24 months. You pay back EMI of say 30,000 PM (for ease of discussion) which includes the interest and part of principal. After 3 years, your outstanding amount will be only 21L principal  because you paid back30,000 x 36 = 10,80,000 including  say 9L of principal and rest interest. So now your remaining 12 years (for 15 year loan) you pay 21000 per month. Of course, bank makes the EMI amount same for before and after the full disbursal by doing an accurate calculation, this was just for illustration, but the idea is same  you balloon your principal repayment in the first 3 years. So if for a 30L loan the regular EMI is say 1000 per Lakh per month, then with tranche EMI, it will become less, say 900 per lakh per month. This is my current understanding, subject to correction by those who have actually taken the loan. Has anyone taken Tranche EMI? What is the actual EMI per Lakh? My query was to compare tranche EMI with Downpayment (DP). Since builder will give discount for DP, amount of loan will become less  which will also make the EMI less. Suppose there is 10% DP discount, 30L flat is now for 27L. So obviously EMI will be less. I was wondering about the difference in EMI between tranche EMI  which is on CLP which is safer in case of delays  and availing DP discount and thereby reducing EMI. Since both methods reduce the loan size, in which method will we pay more to the bank? Just an academic question to understand the financial implications  also, if Tranche EMI on CLP works out same or better than DP, then why should we pay the full amount to the builder and reduce his incentive to complete the work on time? Would appreciate input from those who have analysed these situations.


July 28 2010, 10:39 PM  #2 
Veteran Member

Venky,
i havnt utilised it but have heard from a friend who has mentioned about it. You have highlighted an important point which can be exercised by people as they can save preEMI interest and can chose the amount to be paid, till the time the property is ready for possession. Anything paid over and above the interest by the customer goes towards Principal repayment. The customer benefits by starting EMI and hence repays the loan faster There is another way of payment plan under CLP called Step Up Repayment Facility(SURF)which is in line with the growth ie initial EMI is less and grows in line with salary or income level of an individual.
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MM 
July 29 2010, 10:23 AM  #3 

SURF is totally different  it is an example of banks giving more loan than the salary is qualifying for  resulting in overleveraging.
I am interested in knowing details of tranche EMI  how much principal can one pay back in the initial period? 
July 29 2010, 04:56 PM  #4 

I am not sure if calculations are right, but apparently, based on 2 loan EMI calculators uploaded on Pune forum, with tranche EMI, total cost of 23 L loan for 15 years is 36.5L on CLP while with downpayment of 23 L it comes to 40L total. i.e. there is a 3.5L difference between tranche EMI and full EMI. Hence if there is approx 10% discount (36.5/40*23=20.7=10% of 23) for downpayment, then total cost on CLP and on DP will come to the same final amount paid to bank.
If that is the case, there is absolutely no discount for downpayment at all, even if they say there is 10% discount  so why make downpayment to builder at all? Much better to stay with CLP and let the builder earn his disbursement by actually constructing fast. Tranche EMI with big principal reduction in early 3 years negates the so called downpayment discount (upto 10%) completely and is much better way to take a bank loan in my (current) opinion. 
July 29 2010, 11:20 PM  #6  
Veteran Member

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July 30 2010, 11:22 PM  #7 

Tranche EMI is for CLP where person can afford EMI and current rent  or is buying a second house.
This utility someone posted on Pune using Excel calculator is really good. I was able to see what would happen if the project gets delayed after 23 disbursals. On a 25 L amount, cost is 39L with scheduled payments, only 36 L with some delayed payment scenario. The benefit of CLP is truely realised with Tranche EMI More infor here http://www.indianrealestateforum.com...der12648.html 
August 2 2010, 10:27 AM  #8  
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August 2 2010, 02:12 PM  #9  

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Check Pune thread link posted above for calculator and how to use any bank's CLP linked loan and structure your own tranche EMI  basically you can chose how much principal you pay back in first 23 years. Best is full EMI from start and reduce principal as much as possible. Possible for every bank. Its a brilliant way to avoid downpayment and nullify so called 10% discount for downpayment. Pity that more people are not aware of this structured product  and builders are taking full advantage 

August 2 2010, 03:36 PM  #10  
New Member

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Why pay the principal amount in initial years and not invest it. What we pay to the bank appears too much but its value is reduced to the extent of inflation. Just a different thought for all to ponder. Regards, Ram Pandey 

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