Selecting the best payment plan is vital to buying a property, especially an under-construction property in India. Most homebuyers find some comfort in the construction linked payment plan, one of the many offered options for payment in real estate.
CLP is the step-by-step payment method that alleviates financial strain and risk undertaken by buyers since it is integrated with the completion stages of construction work.
This blog post will outline CLP full form in real estate, CLP meaning in real estate, and the role of this payment system for an under-construction property.
What is a Construction Linked Payment Plan (CLP)?
The CLP full form in real estate is Construction Linked Payment Plan, and its meaning revolves around linking payments to project milestones. With this payment plan, buyers release funds in stages as construction progresses, ensuring better financial management and transparency.
The buyer stages the payments made to a developer in increments called milestones. Each milestone signifies a phase of construction. In contrast to upfront payments, where one pays a bulk sum or a scheduled payment plan, where a payment follows a set period, a construction linked payment plan is unique.
This structured payment plan offers buyers more security and financial control, minimising the risk of delays or incomplete projects.
How Does a CLP Payment Plan Work?
A CLP payment plan makes payments in predefined instalments based on the construction progress. This payment plan ensures that buyers pay only when a certain stage is completed. Let us understand this more clearly with an example.
Example of a Construction Linked Payment Plan
If you are purchasing an apartment valued at ₹1 crore under a construction-linked plan in India, then here is how a typical CLP payment plan would look.
| Stage | Payment Description | Percentage of Payment |
| Booking Amount | Initial booking fee to reserve the property. | 10% |
| Agreement Execution | Down payment after signing the agreement. | 10% |
| Foundation/Plinth Completion | Payment after laying the foundation. | 10% |
| Each Floor Slab Completion | Payment upon completion of each slab. | 7-10% per slab |
| Final Slab Completion | Payment when the final slab is laid. | 10% |
| Internal Work Completion | Payment after internal work is completed. | 10% |
| External Work Completion | Payment after external work is completed. | 5% |
| Possession | Final payment upon receiving possession. | 5% |
Benefits of Choosing a Construction Linked Payment Plan
A construction linked payment plan offers several advantages to homebuyers and developers alike. Let us explore both of them:
Advantages for Homebuyers
- Lower Financial Risk: Payments are linked to construction milestones, ensuring that homebuyers do not face the risk of paying a significant amount upfront. This reduces the financial burden and protects buyers from project delays.
- Greater Transparency: A CLP payment plan provides transparency, as homebuyers can physically verify the construction progress before making any payments. This builds trust between buyers and the developer.
- Easier Cash Flow Management: With payments spread across various stages, homebuyers can manage their finances in a better way. Unlike a lump sum payment, a construction-linked plan allows payments in manageable instalments, reducing the financial burden.
- Developer Accountability: Since payments are directly linked to construction milestones, developers are incentivised to complete each stage on time to receive payments. This ensures that the project progresses smoothly and encourages adherence to deadlines.
Advantages for Developers
- Steady Cash Flow: A CLP ensures a steady inflow of funds as the project advances. It helps developers manage construction costs more effectively.
- Improved Buyer Confidence: When buyers see that their payments are linked to project progress, they feel more secure, enhancing trust in the developer and encouraging more sales.
- Reduced Reliance on External Financing: Developers can reduce their dependence on external funding sources with continuous payments, lowering overall project costs.
CLP and Home Loans: How Do They Work Together?
If you’re opting for a home loan to finance your property, a construction linked payment plan works in tandem with the loan disbursement process, ensuring a secure investment. This structured approach allows buyers to manage their finances efficiently while minimising risks associated with under-construction projects.
Role of the Bank in CLP
In a CLP payment plan, the bank disburses payments directly to the developer in stages, matching the construction progress. This staged financing ensures that your investment remains safeguarded, as payments are made only when milestones are met.
- Pre-EMI Period: During the construction phase, homebuyers only pay interest on the disbursed home loan amount, known as pre-EMI. This reduces the immediate financial burden.
- Full EMI Commencement: After the property is completed and possession is handed over, buyers begin paying the full EMI, covering both the principal and interest, securing their investment in a structured manner.
Construction Linked Payment Plan vs Down Payment Plans in Real Estate
When evaluating payment plans in real estate, homebuyers often compare a CLP payment plan with a down payment plan. Here’s a comparison between CLP and payment plans in real estate:
| Feature | Construction Linked Payment Plan (CLP) | Down Payment Plans in Real Estate |
| Payment Schedule | Linked to construction milestones. | Large upfront payment. |
| Financial Risk | Lower risk due to staged payments. | Higher risk of project delays. |
| Cash Flow Management | Easier payments spread over time. | Higher initial financial burden. |
| Developer Incentive | High, as payments are based on progress. | Low, as full payment is made early. |
While down payment plans in Real Estate may offer slight discounts, they require a significant upfront payment, which may not be feasible for all under-construction property buyers. A CLP payment plan offers greater financial security and flexibility.
Bottom Line
If you prefer a payment scheme that reduces financial risk and aligns payments with the project’s progress, a construction linked payment plan could be the ideal choice. It provides transparency, enhances financial management, and minimises the risk of project delays.
However, it is crucial to thoroughly understand the terms of the CLP payment plan, verify the developer’s credibility, and carefully review the cost sheet before finalising the payment scheme for an under-construction property.
When selecting a construction linked payment plan in India, choosing a reputable developer is also essential. AsmitA Grand Maison is a trusted name in the real estate sector, offering affordable, high-quality housing options with a flexible payment scheme.
AsmitA Grand Maison ensures that your investment remains secure and that your payments align with the construction progress.
Frequently Asked Questions
1) How does a CLP payment plan work for under-construction property?
A CLP payment plan makes payments in predefined instalments based on the construction progress. This instalment-based approach ensures that homebuyers pay only when a certain stage is completed, reducing financial burden and risks.
2) Is a CLP safer than a scheduled payment plan?
It can be safer in the sense that instalment payments are linked to construction progress, reducing the risk of paying too much upfront for an unfinished project. However, it is not entirely risk-free. If the project is delayed, buyers may face extended loan tenure and higher interest payments, leading to a loss in investment.
3) What happens if a project is delayed under a CLP payment plan?
If a project is delayed, homebuyers may face an extended pre-EMI period if they have taken a home loan. However, since payments are linked to construction progress, buyers do not have to pay for unfinished stages. It is essential to check the track record of a developer and the project’s RERA registration to mitigate risks.
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