Under-construction houses may come cheaper, but the double burden of rent and EMI usually keep interested buyers at bay. To combat the issue, several developers offer what seems the solution of all the problems: subvention scheme.
With the recent cut in GST, interest in under-construction property is expected to pick up again. Along with other discounts and freebies, subvention schemes are once again expected to be promoted heavily to attract customers in what is seen as a buyer’s market at the moment.
What Exactly Is Subvention Scheme?
Under the subvention scheme, the buyer has to pay a stipulated amount up front to book an apartment and deferring EMIs are paid by the developer to the bank until a period specified in the contract or date of possession.
Clearly, the scheme is targeted at home-seekers who are currently living on rent and wish to avoid interest payment in addition to rent. Since such home buyers usually find it difficult to afford both rent and interest servicing on the disbursed amount or pre-EMIs, subvention schemes seem to be just the right answer.
The effect multiplies manifold when the prospective home buyers keep hearing about the cases of developers delaying the delivery of the projects, leaving the buyers burdened with both rent and EMI.
Facts To Know About Subvention Scheme
No matter how lucrative such schemes sound, there are many things that every buyer must know before signing on the dotted line.
- The overall price of the property in the subvention scheme is usually higher by 7-8 percent.
- You should do due diligence about the builder’s reputation and project credentials. The involvement of developer in paying the EMI should not let you to forget the fact that ultimately, the onus is on you to repay the loan.
“Verify the developer’s track record on completing projects on time, ability to refund in case the exit clause is invoked, required documentation and evaluate the prospects of the project as well as location,” ET quoted Shveta Jain, Managing Director, Residential, Savills India, a real estate consultancy firm, as saying.
- Don’t be under the impression that the builder will take care of interest servicing until possession as this may not necessarily be the case. Double check on the contract whether the developer’s obligation extends till possession or only for a specified period.
- Even in the subvention scheme, your credit score will be adversely affected if the developer defaults a payment.