If you are a house-hunter, we’re sure you must have come across ads stating that there is ‘no EMI till possession.’ Be it while skimming through newspapers or while searching for properties online, the tagline is provided by many builders across the country. What is this scheme all about? Well, let us give you an insight on the matter.
The ‘no EMI till possession’ scheme, also known as the ‘subvention scheme’ is a financial structure that uses the 20:80 principle. When you’re planning to buy a property, be it an apartment, villa or rowhouse, you will only need to pay 20% of the total property cost as a down payment. The remaining 80% will be financed by the bank. Until the registration process is complete and you get the house in your name, the project developer pays the EMIs to the bank for this home loan. There are two kinds of no EMI schemes you can choose from:
- The builder pays a part of the principal amount and the interest on your EMI directly to the bank. This will be in a reducing format for a fixed period of time; or
- The builder pays the interest to the bank and the principal amount is directly deducted from your loan account by the bank
How Did The ‘No EMI’ Scheme Come Into Existence?
As inflation in the real estate market comes into effects, builders need innovative ways to promote their projects to potential buyers. The no EMI scheme was devised to help take off the burden of EMIs from the customer’s shoulders. As builders, they understand the difficulty many home-seekers faces when they have to pay EMIs while paying rent for their current dwelling. This makes it easier for everyone who wishes to buy a house in the city.
The benefits
If you choose to go ahead in buying a house with this subvention scheme, the benefits include:
- Sound Financial Planning: You can now have better financial planning when opting for the no EMI While paying rent for your current house, you can efficiently get resources for the future EMIS of your new apartment or villa as you do not have to pay any EMIs till you get possession.
- Timely Project Completion: When you go for a subvention scheme for an under-construction project, the builders are the ones paying the EMIs on your behalf till they hand it over. This will ensure the completion of the new residential complex is done on time. Now, you don’t need to worry about not being able to start living in your new house on time as the onus is on the builder to complete it on time.
- Better Appreciation Value: Since you only pay 20% of the property value as a down payment for your property, you have an advantage until you get possession. Projects can take approximately 3 years to get completed. 3 years down the line, there will naturally be an increase in the project value. In case you choose to sell your property after project completion, you will get a higher value considering you only made a down payment based on a lower price rate for it.
Things to keep in mind
As interesting and tempting as the no EMI scheme sounds, it’s important to read the fine print. Before signing the dotted line you should:
- Do extensive research on the financial structuring of the scheme and find out if the builder is really paying the complete EMI. Sometimes, it is possible that a higher price point may be passed on to the customer. Find out whether the builder had completed the same schemes in previous projects.
- Check if there is a limited period of time where the builder pays the EMI. In some projects, the project developers only pay the EMIs for 2 years, irrespective of the time taken for project completion.
- Be aware that if there are defaults in EMI payments by the builder, the bank will hold you accountable and in turn, you will have to make the payment and late fine.
Do the necessary groundwork to make sure that you make all the right decisions while buying a new property. RoofandFloor can help you find the best real estate options in your desired location at the best prices, based on the market rates in the area.