Buying a house on a subvention scheme? Tread with caution
Publish on : 2019-03-15 10:49:36
With prospects of under-construction properties looking up following the cut in Goods and Services Tax (GST),
interest subvention schemes offered by builders through tie-ups with banks are likely to come into focus. Along
with discounts and freebies, such schemes could be promoted heavily to attract customers in what is seen as a
buyer’s market at the moment.
How it works
Paying a small amount—5-20%—upfront to book an apartment and deferring EMIs till possession will attract
prospective home buyers who want to avoid the EMI burden till they move into the house. “The target group is
home-seekers who are currently living on rent and wish to avoid interest payment in addition to rent,” says Shaji
Varghese, ED and Head, PNB Housing Finance. Such home buyers would find it difficult to afford both rent and
interest servicing on the disbursed amount or pre-EMIs, before completion, making subvention schemes useful.
The developers pay the pre-EMIs on behalf of the borrowers until a period specified in the contract or date of
possession. “Loan disbursement is linked to the stage of construction, minimising the risks for banks and
borrowers. The developer undertakes to service the interest component of the loan until a specified period. This
is an incentive offered to buyers instead of giving an upfront discount on the going rate,” says D.S. Tripathi, MD
and CEO, Aadhaar Housing Finance.
Source :- Economic Times