Subvention Scheme - A Sales Gimmick or a Boon

  • Posted on - Jan 11, 17


With the latest form of financial scheme paving in the scenario, the home buyers have now seemed to get more fascinated to avail new home loans. One of the most common ways the builders attract the property investors is by introducing several off-center strategies and subvention scheme is one of such innovative layouts, specially introduced to support the home buyers to a significant extent.

How does it work?

According to a number of surveys conducted on the nature of the home buyers, the EMI has been the greatest burden for them. Keeping this in mind, subvention schemes mainly target  the property investors who are looking for new home loans. Among the three bodies namely the buyer, the bank and the developer, the buyer has to pay an initial booking amount wherein the bank concurs to go with the remaining balance. And, according to this new financial scheme, the EMI will be paid by the developer till the possession of the property. This is surely a great news for the home buyers.

However, the banks have granted this scheme only for the A grade developers. For an instance if you want to buy a 2 bhk flat , subvention scheme allows the lenders and the financial institutes to lay out 80% of the property value to the builders. And, the developers, on the other hand, choose to pay the interest on the buyers’ behalf for a certain period of time as stated in the subvention plan.

Benefits to the buyers –

  • A pre-EMI period where the home buyers can perfectly plan for their future finance schemes is nothing but a boon to them.
  • It’s expected to bring in more discipline to the entire process, as it makes a compulsion for the developers to complete the project on time so that they don't have to pay the interest thereafter.
  • Involving Banks in this scheme makes sure that the investment of the buyer is safe and secure .
  • With the subvention scheme into action, the buyer has to pay an initial payment of as less as 15-20% of the total amount, thereby easing their financial burden to a great extent.

The probable drawbacks –

  • Subvention scheme may come as a stress buster for the buyers, but you cannot avail it at a free of cost. The developers keep on adding the interest rate to the project price and this may make the builders cost more than what they actually spent.
  • If the builders fail to pay the EMI on time, it can hamper the credit score of the home buyer on whose name the loan has been sanctioned.
  • There have been many instances where it’s seen that the developers agree to pay the EMI till the possession, but they mention a bring-to-an-end date in the agreement. In such case, the buyer has to start paying the EMI even if the property is not possessed by then.

To conclude, subvention plan is, quite undoubtedly, a good initiative taken by the builders’ end and it can be a genuine help for the first time investors if the delivery is done on time.  Especially, with RERA coming in, all the deceptive schemes that could have been a hindrance for the sound real estate policy are also expected to come to a sheer end. However, the buyers should always crosscheck the standing of the developers, so that nothing goes wrong in the process. Moreover, the investors should always verify the other financial schemes as well and opt for the one that suits them the best.

To know more about the projects under subvention schemes, one can always consult advisors like FourrWalls which is a leading online real estate portal.


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