CLP, down payment or subvention — which plan actually costs less

A developer will offer you two or three payment plans on the same unit at different headline prices. They are not equivalent, and the cheapest headline is often the most expensive outcome.

Construction-linked plan (CLP)

You pay in tranches tied to construction milestones — 10% on booking, 10% on foundation, 10% per slab, and so on. The bank disburses against each milestone, so your interest accrues only on what has been drawn. Until full disbursement you pay pre-EMI, which is interest only.

• Best for: an under-construction project you are not certain will finish on time.
• The protection: if construction stops, your payments stop. This is the single most important risk control available to a buyer.
• The cost: usually the highest headline price of the three.

Down payment plan

You pay 90–95% up front, typically within 30–60 days of booking, in exchange for a discount of 6–10%. The bank disburses the whole loan immediately and your full EMI starts at once.

• Best for: a nearly-complete or ready project from a developer with a delivery record.
• The risk: you have paid for a building that does not exist yet, and your leverage over the developer is gone the day the money moves.
• The maths: a 8% discount on ₹1 Cr is ₹8 L. Two extra years of full EMI instead of pre-EMI on ₹80 L at 8.5% costs roughly ₹13 L in interest you would not otherwise have paid yet. Run both before assuming the discount wins.

Subvention (the 10:80:10)

You pay 10% on booking, the bank disburses 80% to the developer, and the developer services the interest until possession. You pay the last 10% on handover. It is marketed as 'no EMI till possession'.

• What is actually happening: the loan is in your name and on your credit report from day one. The developer has merely promised to pay the interest.
• If the developer stops paying — which happened at scale in 2018–2020 — the default is yours, the bureau hit is yours, and the flat may not exist.
• The RBI barred banks from disbursing against subvention-style arrangements in 2019; NBFCs and housing finance companies continued in modified forms. Read who the lender is and what exactly they have underwritten.
• The subvention price is usually 6–8% above the CLP price, so you are financing the interest inside the price anyway.

Questions to ask about any plan

1. 1What is the price under each plan, on the same unit, in writing?
2. 2What is the interest rate on delayed instalments, and is the developer's delay penalty symmetric with mine?
3. 3Is the plan milestone-linked or date-linked? A date-linked 'construction' plan is a down payment plan wearing a disguise.
4. 4Which milestone does the last tranche attach to — Occupancy Certificate, or possession letter? They can be months apart.