“In the aspect where it seeks to control frauds, it is obviously welcome. But the side effect will be further drying up of project funds,” Hiranandani, who’s also president of the National Real Estate Development Council (Naredco), said.
The liquidity crunch is fast leading towards bankruptcy for developers whose projects have been stalled or delayed, he said. “While fraud in such schemes must be controlled, the need for alternative funding options is what resulted in subvention schemes being aggressively positioned.”
Subvention had emerged as a scheme to incentivise the buyer in the past five years. For example, the homebuyer has to pay interest on 20 per cent of the loan while the builder pays interest on the remaining 80 per cent for a year. While the need of the hour is to improve consumption, the NHB move may dampen sentiment, said analysts. New launches would take a hit, especially in metros, an analyst pointed out.
These are markets where sales are above 10,000 units per annum. Commenting on the development, Gulam Zia, executive director, Knight Frank India, said the subvention schemes were offered by reputed developers.
“HFCs and NBFCs were offering it while they were under NHB. But banks couldn’t do the same. Now Reserve Bank of India, the new regulator, has cracked the whip to make it a level playing field for all,” he said.
Zia estimated that about 10-12 per cent of the home loan market in top eight cities was through such subvention schemes. "It was one of the most important schemes used by developers to attract homebuyers for under-construction properties. With it gone, the transaction volumes may come down in metro cities. In recent times, the subvention schemes were extended to even ready properties wherever inventory was piling up. The new ruling will make a dent on this side of the market as well," he added.