Construction-linked payment plan vs 20:80 and subvention schemes

3.3.1 What is a construction-linked payment plan?

A construction-linked payment plan ties each instalment to a stage of construction, not to a date. The builder raises a demand when the work reaches a stage named in the agreement for sale. Examples are the foundation, a slab or the plinth. You then pay the share of the price set for that stage. A time-linked plan ties instalments to dates instead, so payments fall due even if the work is slow. Under the RERA Act, 2016, the payment schedule is part of the agreement for sale. Section 19(6) says you must pay in the manner and within the time that the agreement sets. Section 13(1) adds a limit at the start. The builder cannot take more than 10 percent of the cost as an advance or application fee. A written agreement for sale must be signed and registered first. So read the schedule in the draft agreement, line by line, before you pay the booking amount. The plan type decides when your money leaves your account, not the total price.

Plan	When an instalment falls due	What to check
Construction-linked	When the builder reaches a named stage of work	How the stage is proved: architect’s certificate, K-RERA update or a site visit
Time-linked	On fixed dates in the agreement	Whether you must pay even if the work falls behind
20:80 or similar	A small part early, the rest at or near possession	The exact amounts, dates and conditions in the agreement
Subvention	You take a loan early; the builder pays the interest for a period	Who pays the bank if the builder stops

3.3.2 How do you check a construction-linked demand before you pay?

Check the stage that the demand names against the K-RERA project page and the site before you pay. Section 11(1) of the RERA Act makes the builder update the K-RERA page with the status of the project. Rule 15 of the Karnataka RERA Rules, 2017 says the builder must upload these updates within 15 days after each quarter ends. On the page, open the Quarterly Updates tab. Each quarter has a panel with the work percent for each item and each floor. If the demand says the 10th slab is cast, the latest panel must show work at that level. A quarterly update can be up to three months old, so also visit the site or ask for a dated photograph. Ask the builder for the architect’s or engineer’s certificate that the stage is complete, if the agreement mentions one. If you have a home loan, your bank also releases money in stages. Match each bank disbursal to the builder’s demand, and keep every receipt.

1. Read the stage named in the demand letter.
2. Find that stage in the payment schedule of your agreement for sale.
3. Open the latest K-RERA quarterly update and check the work percent for that stage.
4. Ask for the architect’s certificate or a dated site photograph.
5. Pay only the amount the schedule sets for that stage.

3.3.3 What is a 20:80 or subvention scheme, and what are the risks?

A 20:80 plan defers most of the price to possession, and a subvention scheme makes the builder pay your home loan interest for a period. In a 20:80 plan, you pay about 20 percent early and about 80 percent at or near possession. The label is a sales term, so the exact split is in the agreement for sale. In a subvention scheme, you take a home loan early, and the bank pays the builder. The builder agrees to pay the interest on that loan until a stated point, often possession. You, the builder and the bank sign a tripartite agreement. The main risk is that you are the borrower in the loan agreement. If the builder stops paying the interest, the bank can ask you to pay, even if the flat is not ready. Ask whether the scheme price is higher than the standard price for the same flat. Read the tripartite agreement and the loan agreement before you sign, with a lawyer.

Question to ask	Where the answer is
Who is the borrower?	Loan agreement. It is you.
Until when does the builder pay the interest?	Tripartite agreement
What happens if the builder stops paying?	Loan agreement and tripartite agreement
Is the scheme price higher than the standard price?	Cost sheet for each plan, for the same flat
What happens if possession is late?	Agreement for sale, and Section 18 of the RERA Act

3.3.4 What do RBI rules say about home loan disbursal for under-construction flats?

For banks, RBI rules link home loan disbursal for an under-construction flat to the stages of construction. Paragraphs 116 and 117 of the RBI (Commercial Banks - Credit Facilities) Directions, 2025 set this rule. They say that disbursal to individuals “shall be closely linked to the stages of construction”. They also bar upfront disbursal for incomplete or under-construction projects. One exception covers projects sponsored by the government or a statutory authority with no past history of non-completion. There, banks may follow that authority’s payment stages. So a bank must not release the whole loan to the builder at the start, even under a scheme that defers your payments. Sachi checked this text as updated on 15 July 2026. The version updated as on 1 October 2026 is a PDF that Sachi could not open. Sachi did not check the rules for housing finance companies for this chapter. If your lender is a housing finance company, ask it in writing how it disburses for an under-construction flat.

Rule	What it says	Source
Stage-linked disbursal	Bank disbursal to individuals is “closely linked to the stages of construction”	RBI Credit Facilities Directions, 2025, paragraphs 116 and 117
No upfront disbursal	Not allowed for incomplete or under-construction projects	RBI Credit Facilities Directions, 2025, paragraphs 116 and 117
Exception	Projects sponsored by the government or a statutory authority with no history of non-completion	RBI Credit Facilities Directions, 2025, paragraphs 116 and 117

3.3.5 What happens if you pay late, or the builder delivers late?

If you pay late, you owe interest, and if the builder delivers late, the builder owes you interest at the same rate. Section 19(7) of the RERA Act makes the buyer liable to pay interest for any delay in a payment that the agreement requires. Section 2(za) says the rate the builder charges you for a default must equal the rate it pays you for its own default. Rule 16 of the Karnataka RERA Rules, 2017 sets this rate at SBI’s highest marginal cost of lending rate (MCLR) plus 2 percent. On the builder’s side, Section 18(1) applies if the builder fails to complete the flat or give possession by the date in the agreement. You can withdraw and get your money back with interest and compensation. Or you can stay, and get interest for every month of delay until possession. A construction-linked plan lowers one risk, because you pay less before the work is done. It does not remove the delay risk.

Event	What the RERA Act says	Section
You pay an instalment late	You pay interest	19(7)
Interest rate	Same rate both ways: SBI’s highest MCLR plus 2 percent	2(za); Karnataka Rule 16
Builder delivers late	Withdraw with refund, interest and compensation, or stay with monthly interest	18(1)

Sachi reads the K-RERA quarterly updates for Bangalore projects. To check a project’s construction progress against a payment demand, Ask Sachi.