An under-construction home can look like the most affordable route into a flat in Bengaluru. The price is often lower than a ready-to-move unit in the same locality, and the payment plan spreads the cost over the period of construction. Many first-time buyers find this structure attractive. The same structure, however, can expose a buyer to risks that are easy to miss when the sales team is describing the attractions.
This guide explains how payment plans for under-construction homes work, where the risks lie and what you can do to protect your money before you pay. It is not a judgement on any developer. Most projects are built by reputable firms, and delays happen for many reasons. The purpose is to help you see how the schedule is designed, so that you can judge whether your money is moving at the same pace as the work on site.
What a construction-linked payment plan is
Most under-construction homes in Bengaluru are sold on a construction-linked plan. Under this structure, the buyer pays a booking amount first, then further instalments that fall due when the builder reaches specified stages of construction. The stages usually include the foundation, the structure floor by floor, the walls, the flooring and fittings, and possession. The idea is that the buyer’s money follows the progress of the building.
In practice, the plan is only as reliable as the stages that trigger each payment. A stage described loosely, such as completion of finishing work, can be claimed before the work is actually done. A buyer who understands the definition of each stage is much better placed to challenge a demand that does not match the site.
Where the schedule can run ahead of the work
A schedule front-loads money when the early instalments are large in relation to the progress of the building. The first few payments can add up to a substantial share of the price, while the structure is still under way and the most expensive finishing work is months away. If the builder runs into financial trouble or delays, the buyer may have paid a large sum for a building that is far from complete.
Compare the percentage of the price due at each stage with the progress you can see on site. A buyer who is asked to pay a large instalment for a stage that has only partly been completed should ask for an explanation in writing. Keep a simple record of every demand, the date and the work the builder says has been completed. When a demand letter arrives, read the stage name, the percentage, the amount, the due date and any tax shown on it. Check each figure against the agreement, and raise any difference before you pay, because a payment made on a wrong figure can be hard to recover.
Typical stage-wise percentages
The table below shows a common pattern of payments in a construction-linked plan. Actual schedules vary by project, by size of the unit and by the builder’s policy, so use the table as a reference for asking questions rather than as a fixed structure.
| Stage | Indicative share of price | What a buyer should check on site |
|---|---|---|
| Booking and signing the agreement | About 20 percent | That the agreement is signed, that terms match the brochure and that the receipts are in order |
| Plinth and foundation | About 15 percent | That the plinth and foundation work is visibly complete |
| Structure, floor by floor | About 35 percent in total | That the number of completed slabs matches the demand for each floor |
| Walls, flooring and fittings | About 20 percent | That masonry, plaster and fittings are at the stage claimed |
| Possession | About 10 percent | That the occupancy certificate has been issued before this payment is due |
Pre-EMI and interest during construction
Some buyers take a home loan before the building is ready. In the early period, the lender may disburse only part of the loan, and the buyer pays interest on the amount released, often as a pre-EMI. The full EMI starts after possession or after a fixed date. This arrangement can work well when the project finishes on time. It becomes costly when the possession date slips, because the buyer keeps paying interest on a home they cannot yet live in or rent out.
Ask the lender how the pre-EMI period is calculated, when the full EMI starts and what happens if construction is delayed. Ask also how the lender’s disbursement matches the developer’s demands, since a mismatch can leave you short of cash for a stage that has already been paid. Also ask whether the loan’s interest rate is fixed or floating during the construction period, and how a change in rate would affect the pre-EMI. A rate rise during a long construction period can strain the household before the home is even ready.
Possession dates and delay protection
The agreement should state a possession date. Many projects run late, and a buyer should know what protection exists. Under the Real Estate (Regulation and Development) Act, buyers are generally entitled to interest for delayed possession on terms set by the rules, and the agreement may contain its own provisions. Read these clauses carefully, and compare the compensation the builder offers with what the law provides.
When the builder finally offers possession, do not treat the offer as the end of the process. Ask for a handover checklist that covers the flat’s finishes, the fittings, the doors and windows, the water and drainage, the power points and the condition of the common areas. Note every defect in writing and get the builder to rectify it within a stated time, because snag lists are much easier to resolve before the final payment is cleared.
Watch for clauses that give the builder wide latitude to extend the date. A builder who can extend the date for reasons such as weather, labour shortages or approvals may keep you waiting for years without penalty. Ask for the list of grounds on which the date can be extended, and whether each extension must be notified in writing.
Hidden charges and cost escalation
The price quoted at booking is rarely the whole cost. Buyers should look for extra charges such as preferential location charges, car parking, club membership, maintenance deposits, electricity and water connection charges and any goods and services tax that applies to the purchase. Some of these are fixed, while others can be revised, so the agreement should say which costs are included and which are open to change.
Ask for a full cost sheet in writing. Compare the total with the price you were shown, and identify any charge that is not clearly defined. A small clause that allows the builder to revise the price for cost increases can add a significant sum to the final bill, so read it with care.
Carpet area and super built-up area
Under-construction brochures often quote super built-up area, which includes common spaces, lobbies and balconies. The carpet area is the space you can actually use inside the flat. The gap between the two can be large, and the price per square foot should be compared on the same basis. Ask the builder to state the carpet area in the agreement, along with the super built-up area, so that you know exactly what you are paying for.
Payment discipline and the bank account
Pay only through the account named in the agreement or in the registered project record, and keep every receipt. Avoid cash payments and avoid paying to any personal account, even when the agent or a sales representative asks you to. Under the Act, a portion of the money collected from buyers must be kept in a separate designated account for the project, and the rules limit how it may be used. Payments outside this structure reduce your protection.
Ask the builder to confirm in writing which account has been designated for the project and to show you the bank’s acknowledgement for each payment. Keep the receipts, the demand letters and the bank statements together in one folder. If a dispute arises, a clear record of what you paid, when and to whom will be the most useful document you hold.
Protecting yourself in the agreement
Before you sign, make sure the agreement covers the key points. A short checklist can help you ask the right questions.
- The exact stage-wise schedule, with the definition of each stage written out in full.
- The possession date, the grounds for extension and the compensation for delay.
- The carpet area and super built-up area, and the price for each.
- A full list of extra charges, with the amounts and the conditions for each.
- The occupancy certificate as a condition before the final payment and possession.
- The account into which payments must be made, and the receipts you will receive.
Frequently Asked Questions
Is an under-construction home always riskier than a ready one?
It carries different risks. A ready home lets you see exactly what you are buying, while an under-construction home depends on the builder’s delivery. The payment structure and the agreement terms determine how much of that risk falls on you.
Should I pay the large early instalments?
Only if the stage has actually been reached on site, and you have a clear record of the demand and the progress. If the instalment is ahead of the work, ask for an explanation in writing and consider negotiating the schedule.
What is pre-EMI and when does it become a problem?
Pre-EMI is the interest you pay on the released part of a loan before the full EMI starts. It becomes a problem when possession is delayed, because you keep paying for a home you cannot yet occupy.
Can I cancel if the project is delayed?
The agreement and the rules set out the remedies. Speak to a lawyer before you take any step, because cancellation and refund terms vary, and the timing of your action can affect the outcome.
How do I check the progress of a project?
Visit the site regularly, compare the stage with the demands, and check the project’s registered progress updates on the official portal. Keep a written log of each visit and each conversation with the builder.
Paying with a plan, not on trust
An under-construction home can be a sound purchase when the payment plan follows the progress of the work and the agreement protects the buyer. The safest approach is to match every instalment to a visible stage, to keep every payment inside the proper bank structure and to read the possession and extra-charge clauses before you sign.
