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
2-4 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.



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  • In case of possesion after 3 years people will prefer pre-EMI if they are staying on rent as it will reduce monthly burden.

    Specific to conditions you have mentioned fulll EMI and DP are different cases. One will go for full EMI if he has monthly income enough to pay full emi + rent. One will go for DP if he has lot of cash in hand.

    In DP option discount should be good enough to overcome risk factor(always unknown).

    I know i have not given answer to your specific question as O failed to judge them on common factors.
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  • It is good to have a completion based payment to builder. However you should start full EMI from first month itself. This way you repay the loan much earlier than expected tenure.
    Please check the attached file explaining calculations. This is a rough caclulator I created in EXCEL. Good to understand your home loan.
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    1 Comments
    • anilku95841 years ago
      amjamirs2
      i am unable to download the file or view the file .. can you please share the file again.
  • Hi Amjamirs2.

    Excellent tool you have created. Kudos. It is exactly the situation I was trying to calculate.

    Now, is it possible to get what you have made as an actual plan from a bank?

    Doesnt HDFC and SBI have tranche EMI plans - can we chose to repay using the plan you have created?

    Again, very impressive and educational for everyone.
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  • Originally Posted by Venkytalks
    Hi Amjamirs2.

    Excellent tool you have created. Kudos. It is exactly the situation I was trying to calculate.

    Now, is it possible to get what you have made as an actual plan from a bank?

    Doesnt HDFC and SBI have tranche EMI plans - can we chose to repay using the plan you have created?

    Again, very impressive and educational for everyone.


    HDFC has Tranche EMI plan. BOB do not have a Tranche EMI plan. However you can start full EMI with first disbursement or opt for EMI holiday and pay only the interest for 18 months. In between, it is also possible to repay some principle too. SO you can achieve the benefits of Tranche EMI by planning yourself. This should be possible with any banks' loan.
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  • Thats great information, amjamirs2

    The whole reason I started this thread was because I wanted to see whether, when taking loan, CLP is better or DP is better.

    I had earlier felt that by taking 15% DP discount, one cuts the full price of flat paid to bank (repayment price) by around 20-25% (rough calculation). Hence for bank loan, if the builder was "good" (sic) it was better to avail DP discount.

    Now, with CLP also, using tranche EMI plan, how much would the total repayment reduce to bank?

    i.e. Suppose flat price is 30L

    If you take 100L loan, pay only interest for 3years or construction and then repay fullamount over next 15 years, suppose your total cost is 180 L after 15+3 years of repayment.

    If you avail 15% discount, suppose repayment is 150 L after 15 years itself.

    That is 30L less on the price of the flat by taking 15% discount.

    Now suppose you take CLP and opt for tranche EMI scheme for 15 years.

    Final price will be less with DP or with CLP with tranche EMI?
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  • I think you should also add factor of tax benefit on EMI, Like:

      You can not claim any income tax benefit on this pre-EMI interest in the year you pay it to the bank. Pre-EMI interest can be claimed in 5 equal instalments after the construction of the house ends.
      You do not get any income tax benefit on the principal amount for the EMIs that you paid before getting possession of your house (as principal component can be claimed only after you get possession of the house).
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  • Originally Posted by Venkytalks
    Thats great information, amjamirs2

    The whole reason I started this thread was because I wanted to see whether, when taking loan, CLP is better or DP is better.

    I had earlier felt that by taking 15% DP discount, one cuts the full price of flat paid to bank (repayment price) by around 20-25% (rough calculation). Hence for bank loan, if the builder was "good" (sic) it was better to avail DP discount.

    Now, with CLP also, using tranche EMI plan, how much would the total repayment reduce to bank?

    i.e. Suppose flat price is 30L

    If you take 100L loan, pay only interest for 3years or construction and then repay fullamount over next 15 years, suppose your total cost is 180 L after 15+3 years of repayment.

    If you avail 15% discount, suppose repayment is 150 L after 15 years itself.

    That is 30L less on the price of the flat by taking 15% discount.

    Now suppose you take CLP and opt for tranche EMI scheme for 15 years.

    Final price will be less with DP or with CLP with tranche EMI?


    I did below calculations:

    Suppose Loan Amount is 100L
    For DP, builder is giving discount of 15L
    So loan amount is 85L. With DP, total interest payment in 15 yrs for 85 L is 66L.
    Now suppose instead of DP with 15L discount, you go by CLP.
    So loan amount is 100L but disbursement done in installments over next 2 years. With this, the interest payment in 15 yrs comes to below 60L.

    So CLP is better. You can do your own calculations in the excel sheet. I assumed interest rate at 8.5%
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  • For me, economics is simple. The less I pay to the builder today, the more in profit I am - less interest paid over the years + amount saved = amount invested to get 20% return.

    Hence, if the builder (reputed builder) says, 2 years to possesion - I would do my maths on 4, and even then I would be in profit as extra EMIs over these 2-4 years, wouldnt even account for the saving that I am making.

    However, all this argument today is useless- since after booking a flat - you dont know whether you will get the possession at all, quality, FSI, etc and all this trouble with the builder/legal system is a very painful task today.

    Hence, I would only advise you to BUY whats on the ground
    (a 5 year kind of a resale)- and what is tangible - even if it means shelling out 2-5 lacs more than the market price.

    Personally, I wouldnt buy a new/under construction flat unless a regulator is in place, and even after its in place, I would wait for another 1-2 years to check how its functioning - or whether its just a mouthpiece of the builders.

    Also, I think the prices will remain stable for another 3-4 years and hence would only want to enter when everybody is trying to "SELL" than when everybody is trying to "BUY".
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  • There is a function in excel which will calculate EMI.. no need for long spread sheets .. m sure some of u already know this .. but just thought of sharing with all ..

    Function is = PMT(rate per month in fraction,Total Number of Months, Loan Amount)

    Jai Excel :bab (59):
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  • Originally Posted by rogern
    There is a function in excel which will calculate EMI.. no need for long spread sheets .. m sure some of u already know this .. but just thought of sharing with all ..

    Function is = PMT(rate per month in fraction,Total Number of Months, Loan Amount)

    Jai Excel :bab (59):

    Thats a usefull info. Thanks "rogern"
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  • Originally Posted by amjamirs2
    I did below calculations:

    Suppose Loan Amount is 100L
    For DP, builder is giving discount of 15L
    So loan amount is 85L. With DP, total interest payment in 15 yrs for 85 L is 66L.

    So total cost = 85+66= 151 L

    Now suppose instead of DP with 15L discount, you go by CLP.
    So loan amount is 100L but disbursement done in installments over next 2 years. With this, the interest payment in 15 yrs comes to below 60L.

    Here total cost is about 159L, assuming interest "below 60L=59L"

    So CLP is better. You can do your own calculations in the excel sheet. I assumed interest rate at 8.5%


    I have also tried to calculate. I am not sure if calculations are right, but apparently, based on 2 loan EMI calculators uploaded on Pune forum (yours and an earlier one):

    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.

    15% discount is better - some 8L better on a 100L loan, so some 2L better on a 25L loan.

    So upto 10% discount for downpayment should be disregarded as rubbish. 15% is slightly better - 20% would be worth thinking about.
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  • Honestly, I heard about Tranche EMI for the first time. Let me look into this and I will be able to answer something.
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  • Originally Posted by Venkytalks
    I have also tried to calculate. I am not sure if calculations are right, but apparently, based on 2 loan EMI calculators uploaded on Pune forum (yours and an earlier one):

    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.

    15% discount is better - some 8L better on a 100L loan, so some 2L better on a 25L loan.

    So upto 10% discount for downpayment should be disregarded as rubbish. 15% is slightly better - 20% would be worth thinking about.


    It also depends on how the payment schedule is structured in CLP. If major part of the flat cost need to be paid during initial period, total cost will go up. If payment is uniformly distributed, total cost goes down in long run.
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  • Originally Posted by amjamirs2
    It also depends on how the payment schedule is structured in CLP. If major part of the flat cost need to be paid during initial period, total cost will go up. If payment is uniformly distributed, total cost goes down in long run.


    Your interest calculator is really great.

    I was able to see what would happen if the project gets delayed after 2-3 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
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  • Most projects are delayed for > 9 months with some beyond 1 year. One has to factor that in mind. In today's times it is best to go for a re-sale as there are many available. For those who do not need a loan, the CLP works best if they select a reputed builder if there is still one, but still assume a 1 year delay.

    Any other choice will lead to sleepless nights as pre-emi gets computed. Any discount is eaten away by this.

    All builders are overleveraged and move money around to manage their cash flow.

    One should use reverse psycology here. If a builder is ready to discount 20% for full payment then there is a high possibility his financial condition is shaky and is only doing so out of need and other financial sources are atleast 20% more expensive to him then the discount. Which also means the banks are not ready to lend to him, a very bad sign for any project.

    If I know there is a builder offering 20% discount I will stay away from him with the longest pole. If I want the apt at 20% lower, I will try to find a resale investor and see if he is willing to take my offer.
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