EMI Sharing Helps Property Buyers Living On Rent

EMI Sharing or No EMI is nothing but a concept started by builders whereby the home loan borrower do not have to pay the EMI until occupancy. EMI sharing scheme or No EMI is best suited for those who find it difficult to manage cash flows because of dual payments of rent and EMI on the loan. As in the normal case if tenants want to invest in a house, financial constraints discourage them as they have to pay rent until the property is ready for occupancy and bear the EMIs (equated monthly installments) of the home loan. Under this scheme the developer or builder building the property will pay EMIs on behalf of the home loan taker up to a predefined period. This scheme is also known as “EMI Sharing”, “Zero EMI” or “No EMI Till Possession”.

Working of EMI Sharing Scheme

In normal case, property buyers living in rental property have to pay their EMI and Rent until occupancy. Under EMI Sharing Scheme, builder building the property will pay EMIs on behalf of the property buyer or home loan taker up to a predefined period, which is typically the period up to the possession of the property. This helps property buyers to manage his cash flows better. Some builders offering this option are Emaar MGF Land, SG Estates, Ramprastha etc.

Under EMI Sharing scheme, the builder will give you a post-dated cheque for the specified period of time which you need to deposit in your account. In case of delay, you do not have to worry about EMI payments as you already have a committed outflow up to possession. It is essential for you to look for this clause in the agreement and bargain for the payment to be up to possession which means even if the project construction is delayed, you are covered.

Builder either pays off the full EMI for the specified period which is only the interest or they could come out with a partial EMI sharing option. For some projects banks have started the subvention scheme where banks take the EMIs directly from the builder. But such schemes are very few in number.

If discount is what you want

EMI sharing option does not provide you with additional discount. If discount is what you want then down payment mode of payment without EMI sharing will be the most beneficial. Under down payment mode of payment without EMI sharing, the builder will offer maximum discount as he receives the entire payment at the beginning itself.

So the builder’s participation in the EMI will not result in as much saving as in case of down payment. But the big disadvantage of the down payment option is that the builder receives the entire flat cost upfront reducing your bargaining substantially if there is any problem later. If you are not sure of the builder’s credentials then construction linked plan or flexi plan is the best option.

Things to Know

• For the bank, you are the home loan taker or borrower and hence all payment obligations will rest on you. Your account will be debited every month except in rare cases where banks have started the subvention scheme.

• All EMI sharing schemes are time bound – 18 months, 24 months, 30 months etc. So the builders’ obligation is restricted to the predefined deadline. It is essential for you to look for the clause in the agreement and bargain for the payment to be up to possession.

• The interest rate at which the builder will pay the EMI will be fixed at a particular rate and if the interest rates were to rise, the payment obligation to the extent of the rise will be borne by you.

• EMI sharing option does not provide you with additional discount and hence do not opt for this scheme for this reason.

• Before going for EMI Sharing Scheme one must first closely look upon the benefits and loss part of it.

• Builders or developers attractively market this scheme by calling it EMI Sharing Scheme, Zero EMI payment till possession, or low EMIs before possession. The EMI payment before possession done by the builder is taken into consideration by him while quoting the price of the flat. So do not get fooled by the marketing strategy.

• Builder pays off the EMI for the specified period which is only the interest and hence obligations in payment of all principal amounts will rest on you. You must make clear whether he pays only Interest or it includes both Interest and Principal amount as EMI until occupancy.

• However from the occupancy of your property, your EMI will be higher compare to flat without this scheme so be ready for that.