No EMI till possession!!

Yep, thats what the advertisements are blaring in the newspapers in the recent past. A lot of builders are confirming to potential customers that all that they need to do is pay a small fee upfront, around 15% of the cost of the property and the balance will be paid post construction and handover of the apartment. The builder will make the payment of the interest component to the banks until then.

Why would anyone in the right mind bring out an offer where they pay the emi until the construction is completed. No, the builder is not out of mind, it actually makes perfect financial sense- FOR HIM.

There is a saying in business, " there's no free lunch" , so when you start seeing such offers which make little sense to you, it is always better to get into further details and understand it further.

So heres how it makes sense for the builder

• You pay the initial upfront payment of 15- 20% of the value of the property. This contributes to a good cash flow for the builder
• The No EMI , No interest is just that. No Interest payment. One still needs to pay the bank the principal amounts every month in 90% of the cases. In some cases, these are not required to be paid. It is better to check the fine print.
• The price of the apartment is higher than if this offer was not taken. The price of the interest payment for the next few years in built into the cost of the apartment.

So all in all, its a great deal for the builder.

So , does it make sense to completey ignore such offers that come out? Or are there some benefits to the buyer also?

• The one big benefit for the buyer is the fact that because of this kind of clause, the builder is probably more inclined to finish the project on time
• His entire cost is not stuck upfront ( though this can also be achieved by going in for a construction linked plan)

So there are some benefits that you can factor in, but I personally would suggest you take a hard look at such builders and their gimmicks and take an informed decision.

Happy investing

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