Home payment plans in India: What CLP, PLP, flexi, and subvention mean

CLP, PLP, flexi or subvention? India's real estate payment plans offer flexibility-but come with risks. Here's what every homebuyer should know before signing

Buying a home is one of the biggest financial decisions most people make. But for many first-time buyers, figuring out how to pay for it can be confusing.

 

From upfront down payments to staggered instalments linked to construction milestones, there are several options, each carrying its own set of risks.

 

How payment plans work in real estate

 

A real estate payment plan is an agreement between the buyer and the developer that lays out when and how payments will be made. Instead of paying the full amount at once, buyers can opt for structured schedules, often tied to project stages or timelines.

 

These plans give homebuyers more flexibility. They help spread out the financial load and offer the chance to match payment schedules with project progress.

 

Popular payment plans in India

 

Among the plans commonly used by Indian homebuyers are:

 

• Down payment plan

• Construction-linked plan (CLP)

• Possession-linked plan (PLP)

• Flexi plan

• Subvention scheme

 

Each model suits different financial situations and levels of risk tolerance.

 

How CLP, PLP and subvention differ

 

Explaining the most widely used model, Rahul Phondge, chief operating officer at ANAROCK Group, said, “Construction Linked Plan (CLP) requires payments directly linked to the project's construction milestones. For a ₹2 crore apartment, buyers typically pay 10-15 per cent as a booking amount, followed by staged payments of 15-20 per cent at foundation, plinth, floor completion, and finishing stages. This spreads payments over 3-4 years based on actual construction progress.”

 

In contrast, the Possession Linked Plan offers a different structure. “A Possession-Linked Plan (PLP), on the other hand, might just be asking for 10-20 per cent, which is ₹20-40 lakh on commencement, with 80-90 per cent at other stages (usually handover). This is generally going to be much safer for end users to pay just then! Also avoid subvention,” said Aman Gupta, director at RPS Group.

 

Why subvention plans can be risky

 

Subvention schemes are often marketed as a low-stress way to buy a flat. The builder takes on the EMI burden during construction, while the buyer starts paying only after possession. But beneath the surface, the arrangement can expose buyers to financial shocks.

 

Rahul Phondge explained, “Subvention schemes involve third-party financing where builders absorb interest costs during construction, allowing buyers to defer payments until possession.” However, he added, “The primary risks include substantial financial exposure when projects face delays, with buyers potentially becoming liable for interest payments and principal amounts on incomplete projects.”

 

These schemes rely on a three-way contract between the buyer, builder, and bank. If the builder fails to honour the EMI promise, the responsibility quietly shifts to the buyer, regardless of whether the home is delivered or not.

 

Gupta warned that in speculative markets like Gurgaon, subvention remains popular with investor-driven projects. “If trader-heavy projects (often promoted), beware of the risks of PLP, if a weak builder has funding issues and delayed possession. If there are provisions for sale cheap or transfer, aggressive subvention emails, and unnaturally low deposits required to enter PLP, you are likely seeing trader-heavy methods. Always check if your builder has a prior record,” he said.

 

Phondge added, “These schemes attract investors seeking minimal initial commitments, inflating demand artificially and creating price volatility. When speculation-driven demand collapses, genuine homebuyers face delayed possessions, price corrections, and financing challenges.”

 

Legal grey areas and regulatory caution

 

Vikram Sobti, partner and head of real estate practice at Chandhiok and Mahajan, said subvention plans occupy a regulatory grey area. “They are not explicitly illegal, but they are neither fully regulated nor openly supported by financial authorities. The Reserve Bank of India (RBI) and the National Housing Bank (NHB) have issued cautionary guidelines discouraging banks from disbursing full loan amounts upfront to builders.”

 

According to Sobti, Rera does not directly regulate subvention schemes either, though it does require that such arrangements be clearly disclosed. “In practice, many subvention schemes are poorly explained to homebuyers. The tripartite agreement often contains fine print that buyers do not fully understand. In several cases, courts have criticised both banks and builders for misusing these schemes and shifting the burden to buyers unfairly.”

 

The Supreme Court has recently restrained banks from taking recovery action in cases where builders failed to deliver homes. It has also directed the CBI to probe alleged builder-bank collusion where loans were disbursed in violation of rules.

 

What can go wrong for buyers?

 

Sobti said if a builder defaults on EMIs during the subvention period, buyers could face:

 

• Damage to their credit score

• Loan recovery notices from banks

• Financial strain while the property remains incomplete

 

“In the worst-case scenario, the builder could go insolvent, leaving the buyer saddled with debt but no home. While Rera provides relief for delays and delivery issues, it doesn’t cover banking liabilities,” he said.

 

Red flags to watch for in payment plans

 

Phondge pointed out several warning signs that buyers should stay away from. These include:

 

• Booking amounts below 10 per cent

• Extended payment holidays

• Unusually flexible schedules not tied to construction

 

“These signs suggest a project is geared more towards traders than end users,” he said. “Genuine buyer-focused projects have clear timelines, transparent milestone definitions, and simple terms in the agreement. The pricing usually reflects the real market rather than speculative bubbles.”

 

How to handle pre-possession transfers

 

During the construction stage, some builders allow the original buyer to transfer their booking to someone else before possession. This usually happens after the 'Agreement for Sale' has been signed. While not illegal, skipping certain steps can lead to serious problems.

 

“If the builder doesn’t approve the transfer in writing, and a new agreement isn’t registered in the name of the new buyer, Rera will still treat the original allottee as the legal owner,” said Sobti. “Even if the new buyer has paid the full amount, they may not be eligible for possession or compensation in case of delays.”

 

To stay protected, buyers must ensure that:

 

• The builder formally approves the transfer

• A new, registered agreement is signed in the buyer’s name

 

Without this, legal ownership stays with the original allottee, leaving the transferee vulnerable.

 

‘Book now, pay later’—but at what cost?

 

“Book a home now, pay later,” they said. But for many homebuyers, ‘later’ became a painful reality, paying full EMIs without possession while battling stalled or delayed projects. What began as a marketing convenience ended in costly litigation and shattered trust. In the current Rera-regulated environment, buyers are better off choosing CLP or PLP schemes, where payment outflows align with construction progress or actual possession,” said Abhilash Pillai, partner at Cyril Amarchand Mangaldas.