Why a Better Payment Plan Maybe Better Than a Lower Rate

Same home, two offers

Take a 1,800 sq. ft. apartment with a four-year build. Offer A is the headline-friendly one at ₹16,000 a sq. ft., which is ₹2.88 Cr, but it wants 40% at booking, 20% in 12 months, 20% in 2 years and balance at possession (say 4 years). Offer B is ₹16,700 a sq. ft., which is ₹3.01 Cr, with only 10% at booking and 10%, 10% and 70% at same intervals.

On the brochure, Offer B costs about ₹13 lakh more. In today's money it costs about ₹22 lakh less. The "cheaper" home is the more expensive one once you price the timing.

Why timing is worth real money

A rupee you pay in year four is worth less to you than a rupee you pay today, because that rupee could have been earning in the meantime. We used 8% as the opportunity cost. The ranking holds at 6% and at 10% too, with the better plan ahead by about ₹15 lakh and ₹29 lakh respectively.

There are practical reasons as well. If you're borrowing, a plan that keeps 70% for possession means your loan is drawn late, so you aren't paying pre-EMI interest on four years of construction. And if the project runs slow, you haven't already funded most of it.

When the lower rate does win

It wins when the two plans are the same shape. If both ask for the same schedule, take the lower rate without a second thought. It also wins on a ready home, where there's no schedule to speak of and a discount is a straight saving.

It can win if you plan to sell before possession and want the lowest possible entry. For most end users and long-term investors, though, the timeline matters at least as much as the rate.

What we compare, every time

• The rate per sq. ft. on the same area basis.
• The full schedule of instalments, and what each one is linked to.
• The cost of money: your savings, or loan drawdowns and pre-EMI.
• GST and other charges, which sit on top of both offers and rarely change the ranking.

Fynest Take

A lower rate is a number on a hoarding. A better plan is money you keep for years while the building goes up. When we sit down with a client we put both offers side by side in today's rupees, and more often than not the plan beats the rate.

Want us to run it for a project you're looking at? Send us the two quotes and we'll send back the comparison.

Disclaimer

Worked example is our own calculation, using an 8% annual opportunity cost, and excludes GST, stamp duty and other charges. Figures are illustrative and not an offer from any developer.

This article is for information only and is not investment advice or a guarantee of returns. Details are as announced and may change.