A construction linked payment plan splits what you pay for a new home into installments that fall due as the building goes up: booking, agreement, foundation, each slab, finishing, handover. On paper it’s the fairest way to buy something that doesn’t exist yet, because your money follows the concrete. This guide explains how the stages work in Bengaluru in 2026, what RERA says, how a villa plan differs from a flat’s, and how to test a demand letter before you pay it.

What a Construction Linked Payment Plan Is

There are three common ways to pay for an under-construction home in Bengaluru. A down payment plan asks for most of the money upfront, usually with a discount. A time-linked plan bills you on fixed dates whether or not work has moved. A construction linked payment plan bills you when the builder reaches a defined stage, such as the plinth or the second-floor roof slab.

The logic of a construction linked payment plan is simple. If the site stops, the demands stop.

Most large projects in the city offer a construction linked payment plan as the default, and banks prefer it because their loan money goes out in the same stages.

It isn’t a guarantee. A construction linked payment plan is only as honest as the stage definitions in your agreement and the checks you make before paying.

The Stages of a Construction Linked Payment Plan, One by One

No law fixes the stages of a construction linked payment plan. Each developer writes its own schedule into the agreement for sale. The pattern below is common in Bengaluru.

What matters is the shape. A fair construction linked payment plan keeps the early stages light and leaves a meaningful amount, often 10% or more, for handover. That final instalment is your strongest lever to get snags fixed.

What RERA Says About a Construction Linked Payment Plan

The Real Estate (Regulation and Development) Act, 2016 doesn’t prescribe a construction linked payment plan. It does set rules that make one work in your favour.

The 10% cap. Section 13 says a promoter can’t accept more than 10% of the cost of the apartment, plot or building as an advance or application fee without first signing a written agreement for sale and registering it. If you’re asked for 20% at booking, before any registered agreement, that’s a problem.

The 70% account. Section 4(2)(l)(D) requires the promoter to put 70% of the money collected from buyers into a separate bank account, used only for the land and construction cost of that project. Withdrawals have to be in proportion to the work done, and they need certificates from an engineer, an architect and a chartered accountant. It stops your instalments funding another project.

Quarterly progress updates. Registered projects must update their status on the RERA website. In Karnataka that’s the Karnataka RERA portal, where you can search a project by its registration number and see the reported stage of work.

Interest both ways. Your construction linked payment plan will charge interest if you pay late. If the developer misses the completion date, Section 18 lets you claim interest for the delay, or withdraw with a refund and interest.

How a Construction Linked Payment Plan Works for Villas

Apartments are sold as one package. Villas are often split in two.

In many villa projects around Bengaluru, you first buy the plot through a sale deed, and then sign a construction agreement for the house. The plot amount is paid early, often in the first few instalments, and the deed is registered. The house is then billed through a construction linked payment plan, stage by stage.

That villa construction linked payment plan has a real advantage: you own registered land early, which is safer if the developer runs into trouble. But it front-loads your spend, because land is a big part of a villa’s cost.

It also changes the tax. Stamp duty and registration on the plot fall due when the deed is registered, not at handover. Our guide to plot registration charges in Karnataka explains how that duty is worked out. GST can apply differently to a plot sale and to a construction contract, so ask the developer to show both on the cost sheet, and run it past your chartered accountant.

A ground-plus-two villa has perhaps three slab demands where a 20-floor tower has twenty, so each stage of a villa construction linked payment plan is a bigger cheque. Our guide on gated community villas in Bangalore covers the rest of what to check in a villa purchase.

Home Loans, Pre-EMI and Subvention

With a construction linked payment plan, your bank pays the developer in tranches against each demand letter, usually after its own technical team has inspected the site.

Until the full loan is out, you pay pre-EMI: interest only, on the amount released so far. Your principal doesn’t fall until you switch to full EMI.

Pre-EMI is the cost of a construction linked payment plan people underestimate. Add rent, and a five-year build means years of both.

Subvention schemes try to remove that pain. The developer promises to pay your pre-EMI until possession, so you pay nothing until you move in. Be very careful. The loan is still in your name. If the developer stops paying, the bank will come to you. In 2025 the Supreme Court ordered the CBI to inquire into builder-bank arrangements under subvention schemes in the NCR, after more than a thousand buyers were left paying EMIs on homes that hadn’t been delivered.

GST on Each Instalment

For an under-construction home that isn’t in the affordable category, GST is 5%, without input tax credit. It’s charged on each instalment as the developer invoices it, so every demand letter under a construction linked payment plan should show the stage amount and the GST separately.

GST doesn’t apply to a finished home sold after the completion certificate is issued. That’s one reason ready homes can come out cheaper on paper.

Keep every invoice from your construction linked payment plan. And plan GST, stamp duty and registration from savings, because banks generally don’t fund them.

A Worked Example on a ₹3.5 Cr Villa

Here’s how a construction linked payment plan might look on an illustrative ₹3.5 Cr villa agreement value. The stages and shares are our own example, not any developer’s schedule, and the GST line assumes the whole amount is billed as an under-construction home at 5%.

Now the loan. Say you borrow ₹2.5 Cr and pay the rest yourself. Assume an interest rate of 8.5% a year, purely for illustration. If you pay the first two instalments (₹70 lakh) from savings, the bank starts releasing money from the foundation stage. Once ₹1 Cr of the loan is out, your pre-EMI is about ₹70,800 a month. Once the full ₹2.5 Cr is out, it’s about ₹1.77 lakh a month, still without touching the principal. That’s our arithmetic, and your bank’s rate will differ.

Stamp duty and registration come on top, and a separate plot deed would bring part of them forward. So a construction linked payment plan on a villa needs a cash-flow sheet, not just a list of stages.

How to Check a Construction Linked Payment Plan Demand Letter

Every demand under a construction linked payment plan should name the stage, the amount, the GST and the account. Before you pay, check four things.

1. The site. Visit, or ask a friend nearby to. If the demand says “second-floor slab cast”, your villa or tower should have it. Take dated photos.
2. The certificate. Ask for the architect’s or engineer’s certificate confirming the stage for your unit or block, not just for the project in general.
3. The RERA update. Look up the project on the Karnataka RERA portal. The quarterly progress report should be consistent with the stage you’re being billed for.
4. The account. Pay only into the account named in your agreement. Never pay cash, and never pay into an agent’s account.

Your bank’s technical inspection is a useful second opinion on any construction linked payment plan demand. If its engineer won’t sign off a stage, ask why.

Red Flags in a Construction Linked Payment Plan

• Heavy front-loading. 30–40% due before the foundation is a down payment plan with a different name.
• More than 10% before a registered agreement. That breaks Section 13 of the RERA Act.
• Vague stages. “Structure work”, “finishing stage” or “on progress” can mean anything.
• A schedule that differs from the agreement. The brochure’s plan doesn’t bind anyone. The registered agreement does.
• Demands for blocks other than yours. In a phased project, your stage should be measured on your villa or tower.
• A tiny final instalment. If handover is only 2–5%, you have little leverage to get defects fixed.

For a villa project in Anekal taluk, also check that the layout and building approvals behind the schedule are in place. Our approval checklist explains what to ask for.

FAQs on the Construction Linked Payment Plan