Payment plans and finance
Subvention scheme
A plan where the developer pays the buyer's home loan interest for a period (often until possession). RBI has told banks to avoid upfront disbursal.
Also called: 80:20 scheme, no pre-EMI scheme
In a subvention scheme the developer bears the interest on the buyer's home loan during construction, so the buyer pays no pre-EMI. These were often marketed as 80:20 or 75:25 schemes.
The RBI's Master Circular on Housing Finance tells banks that disbursal of housing loans to individuals should be closely linked to stages of construction and that upfront disbursal should not be made for incomplete or under-construction projects. Many buyers in the late 2010s were hurt when developers stopped paying subvention interest.
Watch outIf you offer any interest-support scheme, put the terms in writing, keep loan disbursal linked to construction, and budget the interest as a cost of sale. Buyers and lenders will hold you to it.
Related terms
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