Construction Linked Payment Plan?

A Construction Linked Payment Plan (CLP) in India is a structured and milestone-based financing arrangement primarily used for under-construction properties. Under this scheme, buyers pay in instalments tied to predefined stages of construction like booking (10 to 15%), foundational work, each floor slab (8 to 10% per floor), internal finishing, and final possession (5 to 10%).

What is the Construction Linked Payment Plan Home Loan?

Payments only occur when the corresponding construction milestone is complete, adding transparency and reducing upfront burden.

Advantages are:

• Reduced financial risk. Since payments are linked to visible construction progress, buyers don’t pay for unbuilt work. It also encourages better financial planning, as the staggered instalments allow buyers to align payments with income flow.

• Additionally, knowing that their funding depends on milestone clearance, developers have an incentive to complete work on schedule.

However, this plan has its drawbacks;

• Buyers often incur higher interest costs, since they begin paying pre-EMI interest as soon as the bank disburses funds during construction. 

• Any delay in construction can push out these payments and extend interest obligations.

• The arrangement also offers limited price discounts, unlike upfront-down payment schemes, which may offer 8 to 10% savings. Moreover, milestone tracking adds administrative overhead and potential disputes over assessments of completion.

In practice, CLP aligns well with bank disbursement processes, where lenders pay the developer directly based on verified stages. This coordination ensures protection, as funds are only released once work is verified.

A home purchase is a significant life choice. It involves an enormous financial investment. The fact that buying a home is so expensive keeps many people from making the decision. Home loan EMIs might be intimidating, but construction linked payment plan home loan can help buyers realise their ambition of owning a home without immediately burdening them with high EMIs. 

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What is CLP payment plan?

The CLP full form in real estate is the construction linked payment plan. When you purchase an under-construction project, you do not give the developer the whole sum of the flat cost upfront. The developer may charge for the flat in accordance with the stage of development under the terms of the Real Estate Regulatory Act (RERA). 

How does a CLP plan work?

In this arrangement, the bank continues to give the developer funding for project construction based on the project's real progress. Keep in mind that the bank is actually lending the money to the buyer in this case rather than the builder directly. 

However, because the project is still only on paper, it gives the builder the loan money in installments based on the progress of the development.

Simply put, the bank will transfer to the builder a fraction of the total borrowed funds from the buyer each time a specific phase of the project is finished.

• Lowers the risk for banks and buyers.

• Uninterrupted and timely cash disbursal for the building project.

• Lower cost of borrowing for the builder.

• Chance to book a property at lower rates, for buyers.

I’d like to conclude my answer here about the construction linked payment plan. I hope this helps:)