In a subvention scheme the buyer pays a small amount up front and the builder bears the loan interest until possession or a set date. Buyers should check what happens if the project is delayed.
Example
A 20:80 scheme in Noida
A buyer books a ₹1 crore flat in Noida under a 20:80 subvention scheme: ₹20 lakh up front and ₹80 lakh by a home loan disbursed to the builder, who pays the pre-EMI interest until possession. If the project is delayed and the builder stops paying that interest, the bank still looks to the buyer, who is the borrower.
Figures are illustrative, not market rates.
Questions about Subvention scheme
Who is liable for the loan in a subvention scheme?
The buyer is the borrower and remains liable to the bank. The builder’s promise to pay pre-EMI interest is a separate arrangement. If the builder defaults on it, the bank can demand the interest from the buyer and report missed payments.
Why are subvention schemes risky?
The bank may release money to the builder ahead of actual construction, and the buyer depends on the builder to keep paying interest. If the project stalls, the buyer can be left paying a loan on an unfinished flat. Delays in some past projects led regulators to tighten these schemes.
How can a buyer reduce the risk?
Check the project’s RERA status and progress, read the tripartite agreement between buyer, builder and bank, insist that disbursement follow construction stages and confirm what happens if possession is late. A construction-linked plan with no subvention is the safer choice.
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