Subvention Scheme !!!

SUBVENTION SCHEME 

People who have interest in the real estate industry would have heard about the aforesaid word. Now a days it has now become a catalyst in boosting up the sales of any project and various known names (developers) use this tool to sell their projects. It is also fascinating home buyers who live on rent and cannot afford to pay the EMI and rent simultaneously.

I would like to elaborate more, the meaning of Subvention.

Subvention is marketing tool wherein the customer pays only 15% of the under development property value at the moment and finances the rest from a bank,whose EMI and interest starts after a certain period of time or after the customer gets the possession of the property.

Subvention is an arrangement between three parties. Builder, Customer and a bank. The bank, on the eligibility and credibility of the customer provides a loan to the builder. This loan, for a customer is a housing loan,whose EMI will start after a certain period of time. Generally this time period is either 18,24 30,36 months or till the possession. Till the subvention time period, builder on behalf of the customer pays the interest to the bank. As soon as the subvention time gets over, the EMI for the customer starts. 

Benefits of  Subvention to the customer :-

1. By paying only 15% (till subvention period) customers owns a property.

2. Less capital blockage. Till the subvention period one needs to pay only 15%.

3. Good returns expected by investing the minimum amount.

4. No hassle of Pre EMI or EMI.

5. Flexibility and ease of payment.

The only limitation of subvention for a customer is that his/her loan eligibility is blocked and the property is not transferable till the subvention time period is over.

Now the basic question arises, Why would builder pay the interest on behalf of customer ?

This subvention scheme helps the builder in the form of an economical way of fund generation as the builder is getting the money in form of a residence loan which is much cheaper when compared to commercial loans in terms of rate of interest. Moreover the builder gets the whole amount at one go, something you can correlate to a down payment plan.

We can conclude that subvention is a win win situation for both, the builder and the home seeker.

Comments Welcome !!

Nirad K Singh