Subvention Scheme/No EMI: How is it better to opt for a subvention scheme when buying a house?

Q: A subvention scheme or No EMI plan is when you pay a small portion of the total cost at the time of purchase. The buyer pays 5% to 25% of the full price at the time of the purchase and the rest of the balance at the time of possession. A scheme like this makes buying a house much easier. Also, it is the better option for payment when investing in something like a house.

Joynestmoh, Chandigarh

22nd February 2017

Home Loan in Chandigarh

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subvention schemes

what is subvention scheme?

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Hi Lalit,
Very details answers but i want to know the benefits of the Subvention schemes?

Ankita, Ghaziabad

2nd March 2017

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Thanks Ankita,
Subvention schemes bring discipline to what developers do because banks ensure they get paid as per the extent of the construction work accomplished by developers. This gives developers the motivation to deliver possession in a timely manner, so that he could be relieved from paying the loan interest on the home buyer’s behalf.

Lalit Verma, Mumbai

2nd March 2017

Apart from benefit, there are some drawback of this scheme such as Subvention scheme may relieve the home buyer’s loan interest burden, but it doesn’t come free. Developers add the interest to be paid by him to the property cost. This may sometimes mean that developers charge more than they actually pay as interest.
If developers fail to pay the agreed interest to the bank on time, it can negatively impact the credit score of the buyer in whose name the loan has been sanctioned.

Aarti Bal Pathak, Pune

2nd March 2017

Hi,
There are various subvention schemes in the market, and the idea of subvention itself keeps evolving. Here i am explaining the terms how Subvention Schemes works.Subvention schemes are targeted at home buyers who avail home loans. There are three stakeholders in a subvention scheme: the buyer, the bank, and the builder. These three parties undergo an agreement wherein the buyer agrees to pay an initial booking amount or the down payment (which is a fraction of the total obligation), the bank agrees to pay the remaining balance to the builder (as a home loan), and the builder agrees to pay interest on the buyer’s home loan till the buyer receives possession or as per terms mentioned in their agreement. Banks release the payments to the developer according to the construction schedule.

Lalit Verma, Mumbai

2nd March 2017

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