When you book an under-construction home, the price is only half the decision. The other half is how and when you pay it. Most Bengaluru projects offer a construction-linked plan, where your payments follow the building's progress. Here is how it works, what it really costs with a home loan, and how it compares with the alternatives.
How a construction-linked plan works
You pay a booking amount, then an instalment when you sign the agreement for sale, then further instalments as the builder reaches milestones: the foundation, each slab or group of slabs, brickwork and plastering, flooring and finishes, and finally possession. Each milestone triggers a demand letter, and you or your bank pay that instalment.
RERA protects the start of this process: a builder cannot take more than 10% of the cost as an advance or application fee before a registered agreement for sale. Our RERA checklist covers what else to verify.
A worked example: a ₹1 Cr flat
Take a ₹1 Cr home with a three-year build, paid 20% from your own funds and 80% through a home loan at an assumed 8.5% interest. A typical schedule might look like this:
| Milestone | Month | Instalment | Paid by |
|---|---|---|---|
| Booking | 0 | ₹10 lakh | You |
| Agreement for sale | 1 | ₹10 lakh | You |
| Foundation and plinth | 4 | ₹10 lakh | Bank |
| Slabs (four stages) | 8 to 23 | ₹40 lakh | Bank |
| Brickwork and plastering | 28 | ₹10 lakh | Bank |
| Flooring and finishes | 32 | ₹10 lakh | Bank |
| Possession | 36 | ₹10 lakh | Bank |
Illustrative only. Every project's schedule is different; the one in your agreement for sale is the one that applies. Registration, stamp duty and other charges are extra.
What pre-EMI interest costs
The bank disburses each instalment as it falls due, and until possession you pay interest only on what has been disbursed so far. In the example above, that pre-EMI interest adds up to about ₹8.9 lakh over the three years, starting small and rising as more of the loan is drawn. Once the full ₹80 lakh is disbursed, a 20-year EMI at the same rate is about ₹69,400 a month.
Two ways to manage this: some buyers start full EMIs early to begin repaying principal sooner, and some time their own contribution to cover more of the early milestones. If you are paying rent at the same time, plan for both until you move in.
The alternatives
| Plan | How it works | Good for | Watch out for |
|---|---|---|---|
| Construction-linked | Pay as milestones are reached | Most buyers using a home loan | Pre-EMI interest while you may also pay rent |
| Down payment | Pay most of the price upfront | Cash-rich buyers wanting a discount | More money committed before the home exists |
| Time-linked | Pay on fixed dates | Buyers who like predictable dates | Payments may run ahead of construction |
| Subvention | Builder pays loan interest until possession | Buyers who want low outgo during construction | Liability if the project is delayed |
How to choose
- Using a home loan: a construction-linked plan is usually the safest fit.
- Paying mostly from savings: compare the down payment discount against the risk of paying early.
- Considering subvention: read the tripartite agreement between you, the builder and the bank, and understand who pays if possession is late.
- Whatever the plan: check demand letters against actual progress, which you can follow on the project's RERA page.
Weighing a new launch against a ready home? Our pre-launch vs ready guide compares the two, and our hidden costs guide covers the charges beyond the price. Send us a project name on WhatsApp and we will lay out its payment schedule and your likely pre-EMI costs.
Frequently asked questions
What is a construction-linked payment plan?
A construction-linked plan (CLP) ties your payments to construction milestones. You pay a booking amount and an instalment at the agreement, then further instalments as the builder completes stages such as the foundation, each slab, finishing and possession.
How much do I pay at booking?
Under RERA, a builder cannot take more than 10% of the cost as an advance or application fee before a registered agreement for sale. The rest follows the payment schedule in your agreement.
What is pre-EMI interest?
If you take a home loan for an under-construction flat, the bank disburses money in stages. Until possession, you usually pay only the interest on the amount disbursed so far. That is pre-EMI interest. Your full EMI starts once the loan is fully disbursed or you choose to start it.
Is a down payment plan better than a construction-linked plan?
A down payment plan, where you pay most of the price upfront, can come with a discount, but puts more of your money at risk if the project is delayed. A construction-linked plan costs a little more but links your payments to visible progress.
What is a subvention scheme?
Under a subvention scheme, the builder pays the interest on your home loan until possession, so you pay little or nothing during construction. If the project is delayed, buyers can be left responsible for the loan, so read the tripartite agreement carefully before choosing one.
