“Book now, pay later” has long been one of the most attractive offers used by developers to lure homebuyers. Marketed as a Subvention Scheme, this financial arrangement initially seemed like a relief for buyers who wanted to defer payments while securing a home. Unfortunately, many buyers who opted for such schemes ended up facing financial hardship, project delays, and prolonged legal battles with developers. Recognizing the risks, the National Housing Bank (NHB) in August 2019 prohibited the continuation of subvention schemes and directed financial institutions to avoid funding projects where builders were responsible for paying interest on behalf of buyers. This article explores how subvention schemes work, the pitfalls associated with them, and how homebuyers can take legal recourse under RERA in case of violations.
What Is a Subvention Scheme?
A subvention scheme is a tripartite financial arrangement involving the builder, buyer, and a bank or housing finance company. Under this plan, the buyer makes an upfront payment—usually covering a percentage of the property’s value along with charges like registration fees, stamp duty, and GST. The remaining amount is disbursed by the bank to the builder in line with construction progress, similar to a construction-linked payment plan.
During the initial phase, the builder assumes the responsibility of paying the interest (pre-EMIs) on the buyer’s loan for a specified period, typically until possession. Once possession is due, the buyer begins repayment of the loan through EMIs. While this arrangement appears beneficial to buyers in the beginning, it often leads to complications if the builder defaults or delays the project.
Subvention Schemes and Regulatory Restrictions
The Reserve Bank of India (RBI) had banned subvention schemes as far back as September 2013 due to the financial risks and misuse associated with them. Despite this, developers reintroduced such schemes by linking them to construction milestones and channeling them through housing finance companies, which are not directly governed by RBI’s rules. This regulatory gap left many homebuyers vulnerable to fraudulent practices by builders who failed to honor their commitments.
How Homebuyers Are Cheated in Subvention Schemes
One of the most frequent issues buyers face under subvention schemes is the builder’s failure to pay the promised EMIs. Since most agreements are poorly drafted and rarely protect the buyer’s interests, builders often escape liability when they default. Many homebuyers later discover that the agreement they signed was either a one-sided template provided by the builder or did not contain adequate clauses to safeguard them.
Another serious problem is the delay in project delivery. When possession is not handed over on time, buyers are often compelled to continue paying pre-EMIs without receiving their homes. If the buyer defaults on payments, financial institutions hold them accountable, even though the delay was entirely the builder’s fault. This results in double financial stress: increased property costs due to delay and liability for EMIs without possession.
Filing a RERA Complaint for Subvention Scheme Violations
Under the Real Estate (Regulation and Development) Act, 2016 (RERA), buyers have a strong remedy against developers who misuse subvention schemes or delay possession. The RERA Authority has the power to hear such complaints and direct the builder to comply with the terms of the agreement.
A complaint can be filed before RERA in situations such as:
- When the builder stops paying EMIs as promised under the subvention plan.
- When the developer refuses to repurchase the property despite the buy-back clause.
- When the builder fails to cancel the booking and refund the buyer’s amount after delays or non-compliance.
Through RERA, buyers can seek relief such as timely possession, a refund with interest, or compensation for the financial burden caused by the builder’s default. The procedure is relatively straightforward, and RERA ensures quicker resolution compared to lengthy civil litigation.
Conclusion
While subvention schemes were marketed as a win-win for both builders and buyers, in reality, they often turned into financial traps for unsuspecting homebuyers. The failure of builders to honor their commitments under these schemes has left many struggling with heavy EMIs, delayed projects, and mounting losses. Thankfully, RERA offers an effective platform for buyers to raise complaints and secure justice. By filing a complaint under RERA, homebuyers can hold defaulting builders accountable and either recover their money or secure timely possession of their property.
