20:80 Scheme as some of you would have heard, is a scheme wherein a builder asks only for 20% of the total cost at the time of booking, and the rest 80% is asked only after the project is constructed. Doesn’t it sound great!. Many people would love to invest into these Angelic builders, who play fair. Well, Know the truth below:
It involves the builder factoring in the cost of pre-emi into their launch price. Say, a builder plans to launch a project at 11,000 p.sqft. They would launch the same at 12,000 p.sqft , with discounts(ranging from 500 psft to 1000 psft) offered to clients who don’t go ahead with the 20:80 scheme. This higher launch rate is basically factoring in the pre-emi that the builder will pay monthly to the bank on behalf of the customer. The bank basically charges a higher rate of interest, say 1.5% higher than the base rate (11.5% today for most banks) for the scheme towards the customers. Builder can tie up with the bank for a period of 12, 24 or 36 months, depending on the time of possession. The customer has to pay the balance within the term period or possession, whichever is earlier (Most builders reveal this fact at a later stage), likewise the Builder will not get any other payment from the bank until the expiry of the term period or possession whichever is earlier.
In the scenario of delay in possession by the builder, there are basically two options:
1. The customer has the responsibility of paying the pre-emi to the bank until possession, if the term period stated by the builder expires & he has not given possession.
2. The builder makes the customer compulsorily sign an ADF option with the bank if he/she wants to opt for 80/20, thus enabling the builder to get the entire 100% irrespective of the possession of the building.
Basically both the options are builder friendly.
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