Also called: 20:80 plan, 10:90 plan, No pre-EMI scheme
A payment plan, offered in under-construction projects, in which the builder pays the buyer's pre-EMI interest until possession. Common versions are 20:80 and 10:90.
How it works and what to check
The buyer pays a small part upfront, the bank releases most of the loan to the builder early, and the builder pays the interest until possession. The loan is still the buyer's.
If the builder stops paying the interest or the project stalls, the bank will look to the buyer for EMIs. The RBI and the National Housing Bank have cautioned lenders about such schemes, and buyers in stalled projects have suffered. Read the tripartite agreement closely.
Common questions
Who pays the EMI in a subvention scheme?
The builder pays the interest until possession under its agreement, but you are the borrower and the bank can ask you to pay if the builder defaults.
Is a subvention scheme safe?
It depends on the builder's finances. Check the project's progress and the tripartite agreement carefully.