While the NHB has stopped subvention scheme for HFCs, there has not been any similar circular from the Reserve Bank of India. It means if a person has a loan from a bank, the scheme will continue. You can switch your lender in case you were in the process of purchasing a house and the subvention scheme helped with the affordability.
Real estate sources say there is a slowdown in the industry. An existing buyer can discuss other options with the developer. There is a possibility the developer may offer further discounts in the absence of a subvention scheme. Many developers with a strong balance sheet opted for subvention as a marketing tool to attract customers. Such well-established developers would be ready to give customers other options.
To make homes more affordable, many developers tied up with HFCs for a financing arrangement. Under such deals, the buyer paid up to 20 per cent of the property cost upfront and opted for a loan for the remaining amount. NBFCs were supposed to disburse the loan in parts to developers based on the construction progress. While the project was under-construction, NBFCs only charged the interest as EMI, which was paid by the developer. The arrangement worked for buyers — during the construction period, their EMIs became more affordable.
But the NHB said it received several complaints pertaining to subvention schemes and the regulator has also alleged frauds committed by certain builders. Instead of releasing payments based on the progress of the construction, in many cases, the HFC paid the entire money to the developer after it complete about 50 per cent of the project. Industry sources point out that many HFCs didn’t comply with NHB’s norms on construction-linked disbursement.
If a developer defaulted, the entire burden fell on the borrower, given the loan was sanctioned in his name. If a customer stopped paying EMIs, his credit bureau score would get affected and the lender would consider him a defaulter.