Construction-linked payment plans explained, with a worked ₹ example, and how to send demand letters on time

The construction-linked plan (CLP) is the most common payment plan for under-construction flats in India. The buyer pays a portion of the price as each construction stage is completed. Banks like it because they can disburse home loans against progress. Buyers like it because they pay as the building rises.

For a developer, a CLP only works if demands go out as soon as each stage is reached. This article explains how a CLP is structured, walks through a complete ₹ example, and sets out a process for raising demand letters on time.

01How a construction-linked plan works

A CLP splits the agreement value into instalments tied to milestones: booking, agreement, plinth, each slab, masonry, plaster, flooring, finishing and possession. When the project architect certifies that a milestone is complete, the developer raises a demand on every unit in that building.

The plan sits in the agreement for sale. Three rules shape it:

• RERA Section 13. Before the agreement for sale is signed and registered, the developer cannot collect more than 10% of the cost. So the first instalment, at booking, is usually 10% or less.
• State model agreements. Some states' RERA rules include a model agreement with a payment schedule or maximum cumulative percentages per stage. Check your state's form before designing a plan.
• Bank practice. The RBI's Master Circular on Housing Finance tells banks that disbursals to individuals should be closely linked to construction stages. A plan that front-loads payments far ahead of progress will not be funded by lenders.

02A worked example

Take a 2 BHK with an agreement value of ₹80,00,000 in a 10-storey tower. GST is 5% because the flat is not in the affordable category. The buyer will deduct 1% TDS under Section 194-IA because the price is above ₹50 lakh.

Stamp duty and registration fee are paid by the buyer to the government at agreement and do not appear in this schedule. Possession-stage charges such as advance maintenance and corpus fund are usually billed separately.

What the developer sees in the ledger

Each demand creates a receivable of the total demand amount. When the buyer pays, the ledger records two credits: the amount received and the TDS deposited through Form 26QB. The receivable is cleared only when both are matched. Unmatched TDS is one of the most common reasons buyer ledgers do not reconcile.

03Why demand letters go out late

The causes are usually the same:

• The site team does not tell the CRM team the day a slab is cast and certified.
• Demand letters are built one by one in Word or Excel, so 150 letters take days.
• Unit data, payment received and GST rates sit in different sheets that must be cross-checked.
• Letters for buyers with loans need a copy to the bank, which is a separate manual step.
• Nobody owns the deadline, so a stage completed on the 3rd is billed on the 25th.

A two-week delay on one slab across 150 units of ₹80 lakh is a delay on ₹4.8 crore of collections (150 × ₹3,20,000). Across a year of slabs, the interest cost and the strain on construction funding add up.

04A process that works

1. Milestone recorded. The site engineer records the milestone with a date and photos as soon as it is complete.
2. Certification. The project architect issues the stage certificate. Most banks need it for disbursal.
3. Demand run within 48 hours. The CRM team raises demands for every unit in that tower in one batch, from the same unit and payment data the ledger uses.
4. Delivery. Letters go to buyers by email and WhatsApp, with a copy to each buyer's lender where the unit is financed.
5. Reminders. Automatic reminders before and after the due date.
6. Escalation. Overdue accounts move to a named collections owner after a set number of days, with interest applied as per the agreement.

LeadOne AI connects construction milestones with collections, so demand letters for all the units at a completed stage can be raised together.

05What a demand letter should contain

• Project name, tower, unit number and RERA registration number
• Buyer names as in the agreement
• Stage completed and the date of completion or certification
• Instalment percentage and amount, GST and total due
• Amounts received to date and outstanding balance
• Due date and the interest rate for late payment as in the agreement
• The project's designated bank account under RERA, with IFSC, and a payment reference
• A reminder about TDS under Section 194-IA for units of ₹50 lakh or more
• Contact person for questions

06Other common payment plans