Reading a Construction-Linked Payment Plan Before You Sign It

The payment schedule is the document that decides when your money leaves your account and what has to exist in the world before it does. It is usually two pages, printed small, attached at the back — and it is the document buyers read last, after the floor plan, the brochure and the amenity list. Read in the right order it is the most informative page in the set.

What a construction-linked plan is, and what it protects

There are broadly three ways to structure the price of an under-construction home. A time-linked plan bills on fixed dates regardless of progress. A possession-linked plan takes a large share up front and the balance at handover. A construction-linked plan ties each instalment to a stage of physical progress.

The third is the one that keeps your exposure roughly proportional to what has been built. If a project slows, your outflow slows with it. If it stops, you are not contractually obliged to keep funding a site where nothing is happening. That alignment is the entire protective value of the structure, and it survives only if the milestones are real.

The statutory cap before a registered agreement

Before the schedule matters at all, one provision governs the very first payment. Section 13(1) of the Real Estate (Regulation and Development) Act, 2016 provides that a promoter shall not accept a sum more than ten per cent of the cost of the apartment, plot or building as an advance payment or an application fee from a person without first entering into a written agreement for sale with that person and registering the agreement.

Two consequences follow. First, a booking amount above that proportion, taken before a registered agreement exists, is not something to negotiate about — the section fixes it. Second, "we will register the agreement later" is not a minor administrative deferral; registration is the condition attached to taking the money.

Section 13(2) then requires the agreement for sale to specify the particulars of development of the project — including the construction of buildings and apartments, along with specifications and internal development works — and the dates and the manner by which payments towards the cost of the apartment are to be made. The payment schedule is not an annexure the parties add for convenience. It is content the agreement is required to carry.

Verifiable milestones versus decorative ones

A milestone earns its place if two different people looking at the site would agree on whether it has happened. Test each line against that.

The right-hand column is not necessarily written in bad faith. It is written loosely, and loose language in a payment clause always resolves in favour of the party raising the demand. Notice also which tower the milestone refers to. "Structural work in the project" can be complete in a phase you are not buying into.

How a milestone should be evidenced

A demand letter is an assertion. Ask, before signing, what accompanies it:

• A statement of which milestone has been reached, in the same words the schedule uses.
• Dated photographs of the relevant tower and stage.
• A certificate from the project's own engineer or architect, where the schedule provides for one.
• A reasonable window to pay, stated in the agreement rather than in the letter.
• A right to inspect. You should be able to visit and see the stage you are being asked to fund.

Independently, the periodic progress updates a registered project files with the regulator give you a second source on the same question — one the promoter has filed rather than sent you.

Interest, in both directions

Every schedule charges the buyer interest on a late instalment. What buyers less often notice is that the Act makes the rate symmetrical. The definition of "interest" at section 2(za) of the Real Estate (Regulation and Development) Act, 2016 provides that the rate of interest chargeable from the promoter to the allottee, in case of default by the promoter, shall be equal to the rate which the promoter shall be liable to pay the allottee, in case of the allottee's default. One rate, applied both ways. The rate itself is prescribed by the rules made under section 84 of the Act, and it is the state's rules — not the developer's letterhead — that fix it.

Section 18 sits alongside it, providing for the promoter's liability where possession is not given by the date specified in the agreement. Read the two together and the picture is clear: a delay clause that runs in only one direction is a drafting choice, and it is one you are entitled to question.

How the schedule interacts with a home loan

If you are borrowing, your lender disburses in stages against the same milestones — which is why the schedule ends up governing your bank as much as your builder.

Three things to line up before you commit:

1. Does the lender accept these milestones? Lenders have their own disbursement stages, and a schedule with unusual milestones can leave you funding the gap.
2. What do you pay in the interim? Until the loan is fully drawn, you are typically servicing interest on the disbursed portion rather than a full instalment. That is a real monthly outflow through the construction period, on top of any rent you are paying.
3. Own contribution first. Most lenders require your share to go in before or alongside theirs, so the early milestones are usually funded by you.

Working the monthly numbers through the construction period, rather than only the post-possession EMI, is what makes a plan affordable or not — the EMI calculator gives the full amortisation schedule with no sign-up.

Possession-linked and flexible plans: what they shift

A possession-linked plan looks attractive because it defers most of the outflow. What it does is transfer construction funding to the developer, and that cost reappears in the price. It also weakens your position: a buyer who has paid little has less leverage in a delay, and a developer funding construction from other sources is a developer whose finances you know less about.

Subvention and flexible schemes, where a lender disburses early and someone else services the interest for a period, shift risk again — usually onto the buyer's credit record, since the loan is in the buyer's name whoever is paying it. The question to ask of any such scheme is simple: whose name is on the borrowing, and what happens if the arrangement ends before possession?

The five lines to read before signing

1. The first payment. Is what you are being asked for consistent with the cap in section 13(1), and is the agreement being registered?
2. Each milestone's wording. Does it name your tower and a defined physical stage?
3. The evidence clause. What must accompany a demand, and how long do you have to pay?
4. The interest clause, both ways. One rate, or two?
5. The last instalment. Is it payable on the occupancy certificate and offer of possession, or before? Retaining a meaningful final instalment until the certificate exists is the strongest single position a buyer can hold.

The complete purchase sequence, document by document, is in the buyer guide, and the terms used here are defined in the glossary.