WHAT IS A SUBVENTION PAYMENT PLAN, AND HOW DOES IT BENEFIT THE BUILDER AND THE BUYER?

In Gurgaon, everyone wants to buy a Property; some may use it as an investment, and some might use it as a home, but not everyone has a liquid investment. That’s when the Subvention Plan comes into play. Perfectly designed to feel easy on the pocket of the investor and to make investing in a home easier, this is a very useful plan, especially for salaried employees. What is the subvention plan, how is it beneficial, and how it can also go against you, we will discuss all of it in this blog.

THE SUBVENTION PLAN

In Gurgaon, when the real estate market slowed, and the builders were eager to sell, they came up with the subvention plan, where they tied up with banking partners to offer attractive investment plans to investors, especially salaried individuals. Through this plan, the investor has to pay just 10 to 20% of the amount, and for the rest of the amount, you get sanctioned a loan. Now, the way this is different than a normal property loan is that in the Subvention plan, you don't pay back the principal amount for a certain period of time, usually 3 years. And you start paying back the loan principal amount after 3 years. But that doesn’t mean you don’t have to pay anything for 3 years; a fixed payment of interest gets deducted every month for 3 years. Let’s understand this better with the example of an actual subvention plan.

HOW THE SUBVENTION PLAN WORKS?

There is an option for a subvention payment plan in Signature Global Daxin Vistas, in which you have to pay 10% of the total property value, then you will get a loan sanctioned for 70 percent of the total cost, and the rest of 20%  you will have to pay at the time of possession and Occupancy Certification. So in this project, you will have to pay around 23 to 24 lacs as the first 10%, then nothing for 3 years, but a fixed EMI of ₹20,000 will be paid every month for 3 years as interest. So, in Total you will pay ₹7,20,000 as interest payment in 3 years, and your principal amount will start reducing after that.

HOW DOES THE SUBVENTION PLAN BENEFITS THE BUILDER AND THE INVESTOR?

The Subvention plan benefits both the builder and the buyer in their own unique way.

• To the Builder, this plan benefits as the inflow of funds doesn’t stop, so the construction work stays streamlined and doesn’t break.

• To the buyer, this plan benefits as it removes the liability of following up with payment plans, your cost reduces for the time being with just interest EMI going on, and overall, it eases the tension of timely payments.

HOW IT CAN BE A NEGATIVE FOR THE CUSTOMER

The Subvention plan is an amazing scheme, but it has one downside for the customer: if the builder does not deliver or goes bankrupt, then the customer is liable to pay back the full loan amount, irrespective of the home being delivered or not. But that is the rarest of rare cases and can be easily countered by choosing a reputable builder who has delivered projects in the past on time. In conclusion, the subvention payment plan is an amazing way to start property investment and grow your money, just make sure to choose the correct builder.