With an under-construction flat, the bank releases the loan in stages. Until the last tranche, many borrowers pay only the interest on what has been disbursed: that is pre-EMI. It does not reduce the loan principal. Once the loan is fully disbursed, regular EMIs start.
The alternative is to start full EMIs from the first disbursement, which reduces the principal sooner and shortens the total interest cost. Under a subvention scheme, the builder pays the pre-EMI interest for an agreed period instead of the buyer.
If possession is delayed, pre-EMI can run for years, which is why buyers ask about the project’s RERA completion date before choosing a construction-linked plan.
Example
A buyer in Hyderabad has received ₹30 lakh of an ₹60 lakh loan. At an annual interest rate of 9%, his pre-EMI is about ₹22,500 a month (₹30 lakh × 9% ÷ 12). His principal stays ₹30 lakh until the rest is disbursed and the regular EMI starts.
Figures are illustrative, not market rates.
Questions about Pre-EMI
Is pre-EMI better than full EMI?
Pre-EMI keeps monthly outgo lower during construction, but none of it repays principal. Full EMI from the start costs more each month and less overall. The choice depends on whether the buyer is also paying rent.
Who pays pre-EMI under a subvention scheme?
Under a subvention scheme the builder agrees to bear the interest for a set period or until possession. The loan is still in the buyer’s name, so if the builder stops paying, the bank will ask the buyer.
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