IN THIS POST:
– Why Choose an Instalment Plan?
– Why Choose Full Payment?
About to buy a house in Pakistan? Most investors are faced with the same choice whenever they decide to invest in the real estate sector—should they opt for full payment or instalments? We’re here to help you evaluate the benefits of both payment methods, so you can make the right decision.
Let’s begin!
Why Go with an Instalment Plan?
Before we cover why you should go for an investment plan to buy a property, let’s first discuss what an investment plan is. Most real estate developers in Pakistan offer convenient 3-year to 5-year plans to pay for a property in instalments. The payment plan usually includes an initial 10% to 20% down payment, along with monthly or quarterly fixed instalments that must be paid on a specific due date. The payment plan also generally comprises a final instalment due when the property is handed over for possession. Usually, the buyer or investor cannot sell the property until all the instalments have been paid.
Now, let’s talk about why you should consider an investment plan over full payment. Here are some significant reasons to buy a property on instalments:
- Lack of money
- Urgent need for accommodation
- Protecting your savings
- Better budgeting over time
- Fixed payment schedule
Let’s discuss these in detail below.
Lack of Money
One of the primary reasons why people choose an instalment plan is that they do not have the cash in hand needed to buy the property. While you might have enough financial resources, investing in real estate is rarely easy on the pocket, and if you’re unable to free up cash but don’t want to miss out on adding a new property to your portfolio, then instalment plans provide you that much-needed flexibility and room to maneuver your finances.
Urgent Need for Accommodation
One benefit of paying for a property in instalments is that you get access to the property and can use the premises immediately, especially if you’ve invested in a readymade home. This might be the perfect solution if you need to find accommodation for yourself and your family on an urgent basis, but don’t have the financial resources to pay for the property in full. There are a number of occasions when you might urgently require a house to stay in, such as relocating because of a job, or because your landlord gave you a notice and you cannot find the right rental to move into before the due date, and so on.
Protecting Your Savings
Of course, for many investors, the only reason to choose an instalment plan is to avoid putting all their eggs in one basket. They want to diversify their portfolio rather than using all of their savings to purchase only one property. Some homeowners might also want to save money for a rainy day in case of emergencies, or for an imminent expense.
Better Budgeting Over Time
Let’s face it. Unless you’ve inherited a fortune, most of us have a monthly budget to maintain that includes recurring and one-time expenses, and several other bills. Forking out monthly instalments is thus, often preferred in comparison to going all out on a single property.
Moreover, instalments allow you to budget your expenses better with greater results over time. While you might not be able to save enough money to buy the property you are living in even after 5 years, instead of handing over the monthly rent to your landlord, you can choose to add some more savings into the monthly payments and pay the builder instead—all while living in the house. This will enable you to become the proud owner of your home in just a few years.
Fixed Payment Schedule
One of the best parts about paying for a property in instalments is that you don’t need to worry about the costs changing every 6 months, or a year, as is often the case with landlords and their rental policies. The property is offered to you at a fixed instalment rate with a set payment schedule and a due date. Pay your dues on time, and you’ll eventually own the home. It’s as simple as that.
Why Pay in Cash for the Property?
Now let’s talk about paying for a property in cash, so we can help you choose between full payment or instalments. Cash buying, while often preferred by builders and developers, is rarely a convenient option for buyers, which is why you have the option of choosing an instalment plan. But, paying in full for a property offers its own share of benefits, including:
- Sellers prefer cash buyers
- Immediate ownership of the property
- Better sense of security
- Discounts on full payment
- Reduces overall costs of the property
Here’s a detailed explanation for each of the pros of buying real estate with cash.
Sellers Prefer Cash Buyers
We’ve already touched upon this point briefly above. All sellers, including real estate developers, love cash buyers. But this is especially true in the case of home sellers who’ve put their home on the market. Such individuals want quick money and even faster processing because they either want to reinvest elsewhere or have an urgent need for cash. Cash payments are quick, simple, and direct, and sellers are automatically more eager to show you the best features of the property if they think you’ll pay up immediately upon closing the deal.
Immediate Ownership of the Property
The faster processing time of cash buys is not just ideal for sellers, it’s a plus for buyers too, as they get immediate ownership of the property and can sell or transfer the property as per their liking. Paying for a property in cash also takes away the uncertainty of being able to pay for it in the future every month, especially if you fear being unemployed or are close to retirement.
Better Sense of Security
By taking away the uncertainty and giving you definite ownership of the home, paying in full for a property offers a better sense of security and peace of mind. You’re no longer left wondering about what could happen in the future. You get to add the house to your investment portfolio and your financial resources immediately, with complete security that nobody can take it away from you now. The fact that you’ll never be losing sleep over how you’ll pay the future instalments is a blessing that comes with paying cash for a house.
Discounts on Full Payment
This is one of the hidden benefits of paying for a property in cash, and only a few people know about it. But the fact remains that most builders will offer a certain discount on full payments. This means that if you have the funds to spare, you get to close the deal at a cheaper rate. The rationale for offering a discount is simple. You get immediate ownership, and the builder gets immediate cash to use on future projects—it’s a win-win. You can check out Emaar Canyon Views in Islamabad, Khanial Homes on Chakri Road in Rawalpindi, Al-Noor Orchard in Lahore, Bahria Town in Nawabshah, and Regal City in Sheikhupura if you are looking for discounted offers on full cash payment for houses and plots.
Reduces Overall Costs of the Property
Well, if you’re getting the home at a discount, you’ll automatically be paying less in the long run. But even without officially declaring a discount, cash payments on properties will always cost you less if you tabulate all the instalments costs and compare them to the one-off payment. Ultimately, sellers like cash buyers, and they accommodate all such investors accordingly, meaning you get to spend less and get a new home to your name quicker than many others who opted for the instalment plan.
You now know the benefits of choosing full payment or instalments for your property buying needs. Ultimately, the decision rests on whether you have the funds to buy real estate with full payment and whether you want to make a single investment or diversify your portfolio with the funds you have. Remember that choosing an instalment plan is in no way a cheaper option as a whole, but it is a lot more convenient for the masses.
Made your decision? Here are some features that most people will happily pay extra for, so check them out before you finalise your new home. You can also check out some simple ways to save money for a house in Pakistan if you want to pay in full for the property.
Stay tuned to Zameen Blog for more property investment advice. You can also reach us at blog@zameen.com with your queries, concerns, and suggestions.
