Project & Payment
CLP vs Down Payment vs Subvention: Which Plan Should You Take?
One of these plans is designed to protect you. The other two are designed to get the builder paid sooner. Here is how to tell which is which.
The short answer
Construction linked is the safest. You pay as they build, so a builder who stops building stops getting paid. Your bank disburses in stages, so you pay interest only on what's been drawn.
Down payment buys you a 5–10% discount and costs you your leverage — plus more in interest than the discount saves, if you're borrowing.
Subvention looks like the builder is paying for you. The loan is in your name. Read on.
The comparison
| Construction Linked (CLP) | Down Payment Plan | Subvention Scheme | |
|---|---|---|---|
| How you pay | In instalments, as each construction stage completes | 80–95% upfront, soon after booking | 10–20% upfront. The bank disburses the rest to the builder. |
| Discount | None | 5–10% — the biggest on offer | None, usually |
| Who pays interest before possession | You — but only on what's been disbursed so far | You — on the whole loan, from day one | The builder pays your pre-EMI until possession |
| Your leverage if they're late | Strong. They only get paid when they build. | None. They already have your money. | Weak. The loan is in your name regardless. |
| Risk to you | Lowest | Highest | Hidden — see below |
| Whose credit score is on the line | Yours | Yours | Yours — even though the builder is paying |
There is no free lunch in the subvention row. Read the subvention page before you sign one.
The interest maths — where the discount goes
The down-payment discount looks like the best offer on the table. It usually isn't, and here's why.
Interest paid before possession
₹80 lakh loan, 8.5%, 3 years to possession.
- Down payment — full loan disbursed on day one
- Interest, 3 years
- ₹20,40,000
- Less: 8% discount
- − ₹6,40,000
- Net
- ₹14,00,000
- Construction linked — staged disbursal
- Interest, 3 years (avg ~50% drawn)
- ₹10,20,000
- Discount
- ₹0
- Net
- ₹10,20,000
Because your bank disburses a construction-linked loan in stages, you pay interest on roughly half the principal over the construction period — not all of it.
That saving is larger than the discount. And you keep your leverage. The discount was never the good deal it appeared to be.
The leverage question
Strip away the arithmetic and ask one thing: at any point during construction, do they still need something from me?
| Plan | How much of your money the builder holds at the halfway point | Your leverage |
|---|---|---|
| Construction linked | ~50% | Strong. Stop building, stop getting paid. |
| Down payment | ~90–95% | None. You're asking, not requiring. |
| Subvention | ~80–90% (disbursed by the bank, upfront) | None — and the loan is in your name. |
This table is the whole decision. Everything else is detail.
The subvention trap
Subvention is marketed as the builder paying your EMI. It is not that.
The loan is in your name. The builder has made a private promise to you to service the interest. They have made no promise to the bank. The bank's borrower is you.
If the builder stops paying — project stalls, cash runs out, they simply decide not to — the bank pursues you. The default hits your CIBIL score. You end up paying an EMI on a flat that doesn't exist, probably while still paying rent.
Most subvention agreements oblige the builder to pay interest only until the originally scheduled possession date — not until actual possession.
Project runs two years late? The builder's obligation ended on schedule. Those two years of EMI are yours, even though the delay was entirely theirs.
The National Housing Bank has advised housing finance companies against subvention schemes with upfront disbursal. When the regulator of housing finance says stop, it is worth asking who was carrying the risk.
Which should you take?
| Your situation | Take |
|---|---|
| Buying under construction with a home loan — the normal case | Construction linked. Cheaper in interest, and it keeps your leverage. |
| Paying entirely in cash, no loan | Down payment can genuinely make sense — the interest argument disappears and the discount is straightforwardly yours. |
| Property is ready to move or nearly so | Down payment is fine. There's little construction risk left to hedge. |
| Offered a subvention scheme | Be very careful. Read the clause on delay. Understand that the loan and the credit risk are yours. Prefer a CLP unless the deal is exceptional and the builder is beyond reproach. |
Whatever plan you take: keep 5-10% payable ON POSSESSION. That final slice is what gets the snags fixed on the day you walk through the flat.
Frequently asked questions
Which payment plan is best for buyers?
A construction linked plan, for most buyers taking a home loan. The bank disburses in stages so you pay interest only on what's drawn — typically saving more than a down-payment discount would give you — and the builder only gets paid when they build, so your leverage survives.
Is a down payment plan cheaper?
The discount is real — 5% to 10%. But if you're borrowing, your whole loan is disbursed on day one and you pay interest on all of it for every year of construction. On an Rs 80 lakh loan over three years that's about Rs 10 lakh more than a staged disbursal, which usually exceeds the discount.
What is the risk in a subvention scheme?
The loan is in your name. If the builder stops paying the interest, the bank pursues you and the default hits your credit score, not theirs. Worse, most subvention agreements only oblige the builder to pay until the SCHEDULED possession date — so if the project is delayed, the EMI for the delay period becomes yours.
Should I pay 100% before possession?
No, under any plan. Keep 5-10% payable on possession. That final slice is your only leverage on the day you inspect the flat and find the snags — the cracked tiles, the door that won't shut, the fittings that were promised and aren't there.
Are subvention schemes banned in India?
Not banned outright, but the National Housing Bank has advised housing finance companies against schemes involving upfront disbursal to builders, and regulators have repeatedly cautioned lenders about disbursals disconnected from construction progress. The schemes persist in modified forms and are still marketed hard.