With realty sales especially in the residential segment still to pick up and unsold inventories piling up, developers have been forced to come up with innovative schemes to attract customers to their projects.
Subvention schemes are one of the most popular tools employed by developers in tandem with banks and NBFCs to revive sales by offering their customers lucrative buy now, pay later deals at their ongoing projects.
What is a subvention scheme?
The most commonly used subvention scheme is one wherein a home buyer buys an under-construction property, but does not have to pay the EMIs for a fixed period or until such time he/she gets possession of the property.
Buyers opting to buy realty under a subvention scheme announced by a developer can get a home loan from participating bank, but are not burdened with paying both the EMIs (for their home loan) and rent (for their current accommodation), since the developer bears the interest burden on behalf of the buyer until possession or a pre-specified period.
Also popularly referred to as the 80:20 scheme, a buyer only has pay approx 20% of the total cost of the property upfront with the balance payable at the time of possession.
A popular option among mid-income and salaried buyers, developers have been quick to realize the merits of such customer-friendly schemes and launched them across cities like Mumbai, Delhi, NCR, Bangalore and Chennai to boost sales at their under-construction projects.
Leading public and private sector banks have also been quick to jump on the bandwagon in their bid to increase their tally of home loan customers. However given the risk associated, they are careful to fund only select projects from reputed developers with an excellent track record, thereby raising the credibility of the project and the developer even further.
How the developer benefits:
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