For majority middle-class Indians, buying a property is a once-in-a-lifetime thing, thus before they become proud owners of their dream place, most of them find the need to live in rented accommodations.
When one decides to purchase an under construction property in India, one is bound to make payments at regular intervals as and how the construction proceeds. Such a payment structure is defined to be construction linked progress. Buyers either have to make these payments from their savings or else take home loans, available at all major banks. Against these home loans, banks charge a monthly interest on the drawn loan amount. This interest amount is termed to be ‘interest burden’ on the realty purchasers. These double whammy of interest levied on property buyers that too on under construction property and rent are indeed troublesome.
Real estate developers and mortgage suppliers, as well as banks, have designed a brand new loan set up, whereby the client needs to create a particular direct payment say 10%-30% of the agreement worth (in most cases) at the time of booking and so needn’t pay something until offered possession of the property. This trending scheme is defined as interest rate subvention scheme.
There are numerous types of subvention schemes out there within the market, like 10-80-10, 15-80-5, 10-70-10-10 and 30-40-30. As you’ll see, all of these schemes mentioned earlier are within the variety of a quantitative relation of A-B-C wherever A is the total payable amount by the buyer; B is the share paid by the bank to the builder at varied stages of construction; and C is the bill paid by the bank to the builder in exchange for property possession to the client.
Why the rate of interest subvention scheme?
In a rate of interest subvention scheme everybody together with the customer, bank and also the builder advantages in a number of manners.
- The scheme ensures a gradual flow of funding towards the project at a low risk.
- Real estate developers solely pay the interest quantity or the pre-EMI on behalf of the client.
- Processing the loan for the scheme takes a lot of less time.
- Banks attract an outsized range of client base by giving compatibility with such schemes.
- The burden of paying pre-EMI in conjunction with house rent is wavered off.
- The scheme helps the customer with value appreciation throughout the development amount.