Subvention Scheme for Real Estate Customers: TRICK or TREAT?

Real Estate is a big industry and like any other industry, Real Estate as well relies a lot on its substantial customers. Last year had not been very great for the industry and thus many alluring schemes came out in the industry to attract customers. One of such scheme at hype is subvention scheme.

What is Subvention Scheme?

Subvention scheme is the best scheme for the buyer to save himself from paying the EMI till the possession. Under this scheme, a buyer of an ‘under construction’ building is not required to pay monthly EMIs for a defined time-frame or until he takes possession. But the buyer is required to pay some percent (usually 15-20%) of the booking amount and rest after the possession. This scheme no doubt is beneficial for the buyers as it makes home buying easy and hassle free.

At present only non banking finance corporations and private banks like ICICI and HDFC are associating with the developers for subvention scheme. Under the subvention scheme, once a buyer applies for loan for an under construction property then the borrower need not have to pay any EMIs. Instead, all the interest for first two years will be paid by the concerned builder. Due to heavy risks involved, banks have agreed to associate with Category ‘A’ builders.

Who is offering Subvention Scheme Projects?

Banks are reluctant to finance such schemes with only Category ‘A’ builders, due to which small builders in the industry might find it very difficult to get their projects financed with the banks under such scheme. Experts say that Subvention Scheme works really well with mid-segment projects. Around 200 developers across the country have been trying to attract home buyers with the scheme.  Some of the well known Builders in Gurgaon/NCR that are attracting buyers with such schemes are Tata, CHD, Sare Homes, 3C and BPTP.

Trick or Treat?

This scheme is beneficial for all the three parties-Bank, Builder and Buyer.

For the banks, the scheme is beneficial as the bank gets an access to a larger amount of customers which in return is really good for the business.

The builder can get access to the funds for the project at a much cheaper rate of interest as the funds come in the form of home loans which are cheaper than commercial loans.

Now coming to the buyer, the buyer is the one who gets most attracted to the subvention scheme. For a buyer can be tension free from the burden of paying the EMIs even before possession. Not just this, the customer can enjoy the cost appreciation till the time of possession as well.

Even after all the benefits and attractions there is a catch to this scheme. The buyer must always read the documents thoroughly as a little carelessness can be very risky.  In case of a disputed property the buyer would need to get the money back from the bank.

Apart from this, the buyer must also keep in mind not to fall prey to all these attractive offers without knowing the fine prints. So whether the scheme is a trick or treats completely depends upon the wisdom of the buyer.

Property in Gurgaon