I was planning to invest into an under-construction property last year but didn’t have enough money to pour in. Investing in Mumbai has never been a cheap deal. I was evaluating the probable opportunities available in the market. If I invested into a ready possession property I would have to pay more upfront and then the EMIs could just run out of my monthly budget. Was there any other option that I had? One way was to get out completely from the realty thing and invest into other forms. But I always had a liking for realty compared to allthese forms.
One of the prominent developers was offering an ADF (Advance disbursement facility) scheme in collaboration with a reputed bank and some of my advisors told me that this was probably the best option available for me. ADF scheme carries advantages to both the developers and the consumers. The developers get nearly 90% of the flat cost upfront from the bank. So basically what it means is that they have sufficient liquidity to start with. Now ideally this money would need to go into procuring the raw materialsand resources for the construction of the building. But the builder might even invest some of the money and generate handsome returns before constructing the property.
As a consumer, you also have significant benefits. You don’t need to pay EMI on the disbursed amount until a specific time period or until possession. This is paid by the builder. So effectively, this means that you can save considerable amount until possession and reduce your loan amount and EMIs. Typically the rate of interest is a notch higher as compared to normal loan disbursements.
I personally believe that if you have complete faith in the builder and your scheme is such that you don’t need to pay any EMI until possession then you must go with such a scheme. If the builder delays possession then you can even repay your loan amount completely without having to pay any EMIs.
ADF scheme works well if you don’t need immediate possession of the flat. Use the ADF scheme of home loans to your advantage.