Know more about subvention schemes

A few months back Rhea Pillay, a professional working in Noida, bought a house for herself under the ‘Subvention Scheme’, which was marketed as 80:20. Attracted by the scheme she immediately booked a flat. But recently she got a letter from the developer saying that there might be a delay in completion of the project. Like Pillay, there are many who still don’t know what these schemes are, how they function and what impact they have on the buyer in case of delay in project.

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To get such doubts cleared, Magicbricks recently conducted GuruTalk, an online chat session with Mohit Arora, director, Supertech Limited. The developer has launched many Subvention Schemes lately. The topic was – “All you need to know about subvention/ monthly return schemes.

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What are these ‘Subvention Schemes’? Under these schemes, a buyer is expected to pay a part of the total cost as down payment and the remaining when he/she gets possession of the house or property. Generally, the down payment is 20 per cent of the total cost of the project.

How does this work? Arora says, “Bank pays the full loan amount to the builder. Buyers pay 10 per cent and banks pay 80 per cent to the developer, on behalf of the buyer. Developers pay the interest of the amount till possession or the agreed time. After possession, buyers pay EMI as usual.”

Who are benefitted the most by these? “Subvention Schemes are more beneficial to end users. Since, the end user is paying rent and does not want to carry the load of the EMI as well, which is avoided till possession,” adds Arora.

While this may sound like a win-win for both the developer and the customer, there are several catches that customers must be aware of. Arora says, “Beware of restricted time-lines that some developers are putting in to bear the interest. The best would be to take the subvention till possession.

In case where the developer delays the project and fails to deliver on time, the developer will have to bear the interest. Arora says, “In case the subvention is time-bound then the developer will have to pay the agreed penalty.”

It is also wise to check the credibility of the developer. “If the developer defaults the burden of the loan amount will be on the buyer,” further adds Arora. This usually happens in case of small developers. “The developer might be paying the interest till the time he delays or unable to deliver. But ultimately the loan is in the name of the buyer and your loan limits will remain exhausted, without even getting a home. Go only for credible developers for subvention,” explains Arora.

Another point to remember is, if the developer delays the EMI he is supposed to pay on behalf of the buyer, the credit information bureau will hold the consumer responsible not the developer because as per the bank’s records it is the customer who is the borrower. This impacts the customer’s credit score.

How do subvention schemes work in re-sale property? Once the loan will get transferred to the new buyer, subject to his/her eligibility, the buyer will start paying the EMIs after getting possession.

Are there any ways to check if a particular scheme is genuine? Arora suggests that the best way to check is with the bank regarding all approvals and the genuineness of the scheme with respect to a particular developer.

Source: http://content.magicbricks.com/industry-news/know-more-about-subvention-schemes/79165.html