Hi Guys
I was trying to calculate the profit while making complete down payment with Loan over CLP plan for End Users.

I know that most of the investors (Rather All) prefer CLP over down payment, however for end user it might be more beneficial to go for down payment.

Here is how it works:

Let’s say a user book a flat the total cost of which is 40L he pays 10L from his pocket and rest 30L he has to pay by bank Lone.

Also let’s assume that the construction completes in 3 years and there are 12 installments of each 2.5L at each quarter.

If a person choose CLP plan he will have to pay pre EMI to bank which in a duration of 3 years will sum up to Rs. 3,43,750/- (Assuming Interest rate of 10%).

The actual EMI’s will start after possession and will run till 20 years.

On the other hand if a person chooses down payment option he can save approx. Rs. 3.5 L on pre EMI an additional 10% discount on BSP which will be another 3L.

In total he will be able to save Rs. 6.5 L on his total investment.

The one thing here to remember is that burden of heavy EMI will start from the first month itself which could have been delayed till possession if CLP is chosen. But ultimately one has to pay those heavy EMI’s sooner or later and in both the cases for 20 years.

Note: The whole assumption here is that person is buying the property for his own use and not for sale during the construction phase and the source of payment is Bank Lone.

Guys let me know your opinion/POV on this.
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  • Originally Posted by akgc22
    Hi Guys
    I was trying to calculate the profit while making complete down payment with Loan over CLP plan for End Users.

    I know that most of the investors (Rather All) prefer CLP over down payment, however for end user it might be more beneficial to go for down payment.

    Here is how it works:

    Let’s say a user book a flat the total cost of which is 40L he pays 10L from his pocket and rest 30L he has to pay by bank Lone.

    Also let’s assume that the construction completes in 3 years and there are 12 installments of each 2.5L at each quarter.

    If a person choose CLP plan he will have to pay pre EMI to bank which in a duration of 3 years will sum up to Rs. 3,43,750/- (Assuming Interest rate of 10%).

    The actual EMI’s will start after possession and will run till 20 years.

    On the other hand if a person chooses down payment option he can save approx. Rs. 3.5 L on pre EMI an additional 10% discount on BSP which will be another 3L.

    In total he will be able to save Rs. 6.5 L on his total investment.

    The one thing here to remember is that burden of heavy EMI will start from the first month itself which could have been delayed till possession if CLP is chosen. But ultimately one has to pay those heavy EMI’s sooner or later and in both the cases for 20 years.

    Note: The whole assumption here is that person is buying the property for his own use and not for sale during the construction phase and the source of payment is Bank Lone.

    Guys let me know your opinion/POV on this.


    What about the cost of funds for the 3 year period.

    Assuming you invest the Down Payment money (27 Lacs) in a FD for 3 years with 9% interest rates.. you will get around 7.5 Lacs as interest... (assuming no tax payment - if you invest in your mom's name for eg.)

    In case the money comes from Loan upfront, the Bank will start chargin you interest on the total amount upfront... which will be much more than the Pre EMI interest calculated above... someone has to do good calculation here to find that differential...

    Keep this in mind and calculate which one is better?????
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  • Originally Posted by hsgulati
    What about the cost of funds for the 3 year period.

    Assuming you invest the Down Payment money (27 Lacs) in a FD for 3 years with 9% interest rates.. you will get around 7.5 Lacs as interest... (assuming no tax payment - if you invest in your mom's name for eg.)


    I think you did not read it completety or carefully. I clearly mentioned that the source of payment is Bank Lone. So no point of FD.


    In case the money comes from Loan upfront, the Bank will start chargin you interest on the total amount upfront... which will be much more than the Pre EMI interest calculated above... someone has to do good calculation here to find that differential...

    Keep this in mind and calculate which one is better?????


    You anyway have to pay 240 EMIs for 20 years loan sonner or later. Pre EMI wont reduce your liability of 240 EMI's.

    And I clearly mentioned this is for end user and not for investor who wants to sell in between.

    Now read my post again and then reply.
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  • If in case of DP, the builder vanishes with all the money or gives possession after 6-8 years, all calculations would go for a toss .

    Benefits or no benefits, while making DP, one should be real, real extra careful on choosing the builder .
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  • Originally Posted by akgc22
    I think you did not read it completety or carefully. I clearly mentioned that the source of payment is Bank Lone. So no point of FD.



    You anyway have to pay 240 EMIs for 20 years loan sonner or later. Pre EMI wont reduce your liability of 240 EMI's.

    And I clearly mentioned this is for end user and not for investor who wants to sell in between.

    Now read my post again and then reply.


    I understand that nowadays number of banks (HDFC, SBI etc) are offering option to start paying the EMI from day 1 instead of first paying pre-EMI till possession and subsequently EMI. This means that in case your loan has been approved for say Rs. 50 lakhs, and the first installment paid by the bank is only 5 lakhs, even then, if your fund position allows you, you can start paying EMI on 50 lakhs from day 1 itself. In this case your 240 installments start from day 1 itself.

    Can someone who has used this option throw more light on this ?
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  • Originally Posted by MANOJa
    If in case of DP, the builder vanishes with all the money or gives possession after 6-8 years, all calculations would go for a toss .

    Benefits or no benefits, while making DP, one should be real, real extra careful on choosing the builder .


    Regarding builder, buyer needs to be careful while choosing the project.

    About delay, in CLP Actual 240 EMI's will still be there but the Pre EMI amount will further increase whereas in DP the 72 EMI's will be paid out of 240 in 6 years.
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  • Originally Posted by akgc22
    Regarding builder, buyer needs to be careful while choosing the project.

    About delay, in CLP Actual 240 EMI's will still be there but the Pre EMI amount will further increase whereas in DP the 72 EMI's will be paid out of 240 in 6 years.

    Can you add one more analysis to your report here:
    How many projects got completed in time. I can bet not above 10%... 10% is very aggressive figure otherwise I dont know even one such project...

    Secondly, time value of money - delay paying money and use it anywhere else... builder discount on down payment is the worst return on any investment.

    Down payment - terrible idea...!
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  • Hi AKGC2,

    I would say it is personal choice. There are pros and cons for both.

    One thing that I am pretty sure of is that : If all investors go for CLP, there is pressure on builder to deliver and not delay beyond a limit.

    CLP ensures a little bit of extra peace of mind to the customer.

    In case of CLP, if you start paying full EMI from day 1, you derive the same/similar benefit as that of DP. Somebody on the forum had done the calculations. Please search.

    Many banks do not easily allow DP - you need to check on that.

    An interesting after thought: If during the construction phase, due to whatever calamity, if the prices fall too much, you can exit with some loss in CLP, not in DP.
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  • I completely support Ajay on this point. There is rarely any project which is completed on time. Worst case would be if construction will not start for 2-3 years. In case of CLP you just paid 20-30 percent but in DP you have paid 100%. sari calculation dhari ki dhari rah jaengi aur tum EMI pay karte rah jaoge...

    Its better to pay more intrest on loan rather then paying full EMI without home.

    Originally Posted by ajayrec
    Can you add one more analysis to your report here:
    How many projects got completed in time. I can bet not above 10%... 10% is very aggressive figure otherwise I dont know even one such project...

    Secondly, time value of money - delay paying money and use it anywhere else... builder discount on down payment is the worst return on any investment.

    Down payment - terrible idea...!
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  • Guy’s the case I mentioned is not generalized one and is not applicable to both end users/investors. It’s a specific one where one can use his intelligence to decide which plan is better for him.

    Again it all depends from project to project, loan amount and also the CLP plan where one has to make some calculations to choose between two plans.


    As an investor I myself will never go for DP.

    In some specific CLP plan one will easily make 30-40% payment in initial 3-5 months (Unitech South park is one example here) without even construction getting started.

    Another thing is that project can get delayed in any phase not necessarily because the construction could not be started for 2-3 years.

    In DP you pay 90-95% payment (not 100%) while in CLP you would have paid 40-50% in initial 6 months or so (Again depend on the project and CLP plan)

    So there is a difference of 50% payment in both the plan (Not 90% which most of the user think).

    Again taking the above case itself, there is a difference of Rs 20L (50% of 40L) which you paid in advance in DP. Now if the possession is delayed say another 2-3 years in CLP an end user will pay another 2 to 2.5 as pre EMI whereas his total liability still stands as Rs. 35 L.

    So and end user will be losing 6.5L if possession is on time or 8.5 to 9 L (6.5 plus 2 to 2.5 additional pre EMI interest) if possession is delayed by 2-3 years.

    And all this for 20 L extra payment not made because of CLP. The loss ranges 30-40% of this additional payment.

    Guys again this is a specific case. One can use his mind to know which plan is better for him, taking all the factors into consideration, the some of which are:

    1. Builder’s Previous Record.

    2. Loan amount and Risk taking capacity

    3. CLP plan. (This is one important factor)

    4. Discount offered in DP (This could be more e.x. 13% in Unitech South Park case though Unitech past projects are delayed specifically Unitech Sunbreeze)
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  • there is an advantage for down payment but only for end user in terms of stamp duty.
    for eg whenever u r making a down payment u will be getting the house at a price approx 10 % lower than CLP. So at the time of registry u will pay stamp duty at a price lesser than CLP price.
    this advantage will come if u r a end user and want to register ur property.
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  • I think the most important factor is the Builder’s Previous Record ( along with the location ) . Loan amount and Risk taking capacity varies from one individual to another & cannot be generalized . Most big builders have CLP plans, where one has to make 25-40 % payment, even before a brick is laid . So, CLP is not in control of the person looking to book .


    Originally Posted by akgc22
    Guy’s the case I mentioned is not generalized ..............................................an is better for him, taking all the factors into consideration, the some of which are:

    1. Builder’s Previous Record.

    2. Loan amount and Risk taking capacity

    3. CLP plan. (This is one important factor)

    4. Discount offered in DP (This could be more e.x. 13% in Unitech South Park case though Unitech past projects are delayed specifically Unitech Sunbreeze)
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  • I think if the builder is good and there is no risk in defaulting or project being scrapped, the down payment with loan works better for an end user.

    Your EMIs will start as soon as you purchase the property, but then your term will also be reduced. Your upfront cost is lesser than a CLP, with DP discount and since bank is loaning about 80% of the money. You may have to invest only around 10% upfront and the EMIs. You may also be able to get some tax benefit of the EMIs. One other benefit I see is, if you get cash in the middle of the year, you can pay the bank anytime and reduce your EMI/term.
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  • Originally Posted by MANOJa
    I think the most important factor is the Builder’s Previous Record ( along with the location ) . Loan amount and Risk taking capacity varies from one individual to another & cannot be generalized . Most big builders have CLP plans, where one has to make 25-40 % payment, even before a brick is laid . So, CLP is not in control of the person looking to book .


    Yes you cannot control CLP as you cannot control construction as well. However CLP is known before you book a flat. So looking into CLP a person can decide which payment mode is better, CLP or DP.

    Now a day in most of the CLP payments, the initial installments are heavy like 10-15% and then at the later stage these are reduced to 5%. Hence if the CLP is such that you are paying 40-50% in first few months itself (like before starting of construction itself or just at the start of the construction) then it’s better to go for DP payment mode.

    Builders are very intelligent and they make CLP in such a way that customer pays 30-40% before construction or just at the construction (Even digging land is also said that construction is started).

    Again all these not generalized but depends projects to project.
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  • I just want to mention one thing here is that this discussion is not to prove who is wrong or who is right but to bring out, with multiple opinions, what is right for a buyer considering all pros and cons of two payment modes.
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  • Digging land or excavation is a part of the construction & it cannot commence ( legally ), without all the approvals of the relevant authorities .


    CLP cannot be controlled or negotiated & most builders ( the bigger & decent ones ) all have similar kind of plans .
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