subvention plan
Take care in taking advantage of property developers' subvention scheme, know why?
The National Housing Bank (NHB) asked housing finance companies in July to stop offering interest subvention plan through the developer. Now some developers are offering their own offers. Normally, home buyers have to make a small upfront payment. The remaining amount has to be paid after getting possession of the house.
If the new customer chooses subvention scheme of the builder in which 9-20% upfront amount is to be paid and the rest of the money is taken on possession (by taking a loan), then there is no violation. But, if the lending institution is involved at the beginning of the process, then one needs to be careful.
"After NHB's ban, some builders are offering to reimburse interest to customers in place of lenders," says a senior HFC official.
The borrowers should read the terms of the agreement carefully. Patel says, "Since developers are independent entities, so they are free to create schemes while staying within the legal framework. The borrower should get legal and tax advice before signing the agreement."
By the way, recently the RBI has not issued any circular on the lines of NHB. However, in 2013 he warned on 20:80 or 5:95 schemes. After this, banks shifted to construction-linked disbursals for such people. This concept was 'gray' due to the unhappiness of the regulators about such products. In other words, it was not accepted.
"It is better to stay away from interest subvention schemes right now," says DS Tripathi, MD, and CEO of Aadhaar Housing Finance.
Borrowers who have already agreed to such schemes can face the dilemma. NHB's circular covers not only new products but also old offers. This means that even before the NHB order, if there is an agreement for the subvention scheme, then there is a problem.
Tripathi said, "If there is a delay in construction, you can withdraw your hand from the Lender Agreement." In such cases, the borrower will have to go to the builder to review the agreement.
However, the circular will not apply to the amount already paid. Shaji Varghese, ED and business head at PNB Housing Finance, said, "Lenders will have to continue paying money with subvention plan."
The first math-home buyer paid 5-20 percent upfront for booking an under-construction flat. After the approval of the buyer, the buyer did not pay before possession or the stipulated deadline. During this time, the developer continued to pay interest on behalf of the borrowers.
No, the new loan has to be given under the interest subvention schemes. -The order is applicable to those loans which have been approved but have not been given. -HFC will review the existing subvention schemes.
If the new customer chooses subvention scheme of the builder in which 9-20% upfront amount is to be paid and the rest of the money is taken on possession (by taking a loan), then there is no violation. But, if the lending institution is involved at the beginning of the process, then one needs to be careful.
"After NHB's ban, some builders are offering to reimburse interest to customers in place of lenders," says a senior HFC official.
The borrowers should read the terms of the agreement carefully. Patel says, "Since developers are independent entities, so they are free to create schemes while staying within the legal framework. The borrower should get legal and tax advice before signing the agreement."
By the way, recently the RBI has not issued any circular on the lines of NHB. However, in 2013 he warned on 20:80 or 5:95 schemes. After this, banks shifted to construction-linked disbursals for such people. This concept was 'gray' due to the unhappiness of the regulators about such products. In other words, it was not accepted.
"It is better to stay away from interest subvention schemes right now," says DS Tripathi, MD, and CEO of Aadhaar Housing Finance.
Borrowers who have already agreed to such schemes can face the dilemma. NHB's circular covers not only new products but also old offers. This means that even before the NHB order, if there is an agreement for the subvention scheme, then there is a problem.
Tripathi said, "If there is a delay in construction, you can withdraw your hand from the Lender Agreement." In such cases, the borrower will have to go to the builder to review the agreement.
However, the circular will not apply to the amount already paid. Shaji Varghese, ED and business head at PNB Housing Finance, said, "Lenders will have to continue paying money with subvention plan."
How did the scheme work and what happened now?
The first math-home buyer paid 5-20 percent upfront for booking an under-construction flat. After the approval of the buyer, the buyer did not pay before possession or the stipulated deadline. During this time, the developer continued to pay interest on behalf of the borrowers.
After the order of NHB
No, the new loan has to be given under the interest subvention schemes. -The order is applicable to those loans which have been approved but have not been given. -HFC will review the existing subvention schemes.
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