When you are too eager to own your dream house you may tend to believe any offer that promises to turn your dream into reality. Rather than making rational evaluations you tend to ignore the obvious red flags and pitfalls as you driven more by possible sense of accomplishment of owning a house. This is what happened to many homebuyers of Delhi NCR when they went for home loan EMI subvention scheme offered by many builders and developers a decade ago.
According to TOI, subvention schemes were supposed to make things easier for buyers, but in many cases, became instruments that gave builders access to loans without accountability and left homebuyers in the city to bear the aftershocks, like demand letters to pay EMIs despite houses running years behind schedule.
Also read | How an easy home loan EMI scheme turned into a nightmare for many homebuyers in Delhi NCR
How does a subvention plan work?
It’s an investment plan in which one buys a house but begins to pay EMI only after possession. Usually, a buyer needs to pay around 10% upfront. So, if it’s a 1-crore house, upfront payment is 10 lakh.
It differs as how is the house financed. The loan is taken by the realtor directly from the bank. The realtor pays a pre-EMI till the time of possession. But this EMI is only on the interest component. The buyer begins to pay EMI on the principal and the rest of the interest component after possession. The delivery timeline is typically 3 years with a grace of 6 months.
The problem was that the realtors missed the delivery timeline and stopped paying EMIs. Delays ran into years, and banks raised EMI demands to buyers, which included penalties on defaults. So what seemed like an easy way to buy a house became a nightmare
In 2015, when a subvention scheme was implemented under Amrapali’s Adarsh Awas Yojna with a payment structure of 10%-80%-10%, Rakesh Bhatia decided to invest. Under this arrangement, homebuyers were required to pay 10% of the amount initially, while 80% was financed by the bank, and the remaining 10% had to be paid separately.The project primarily attracted govt employees, and Bhatia, a supervisor in the ministry of communication, was among them. He secured a home loan of Rs 35 lakh. At the time of booking, he paid Rs 4 lakh, while the bank disbursed the first instalment of Rs 12 lakh.However, he later discovered that phases 4 and 5 of the project had not been approved by the Greater Noida Industrial Development Authority. His flat was in phase 4. “We had no idea about the approval status at the time of booking. It was only after 18 months that I learnt about it,” Bhatia said.
He had booked a 3BHK flat and, under the subvention scheme, paid an additional Rs 330 per square foot. The builder was supposed to bear the pre-EMI interest till possession was handed over. The project had a completion timeline of three years. “The builder paid for eight or nine months and then stopped. After that, the case went to Supreme Court,” he said.
There were 1,100 homebuyers in phases 4 and 5, 80% of whom had opted for the subvention scheme. “It is shocking that the bank released funds for a project that had no approval. When we asked the bank how they disbursed our loans, they had no answers. This could not have happened without collusion between the bank and the builder,” Bhatia said.
While homebuyers lodged complaints at various forums, banks filed cases against them at the Debt Recovery Tribunal (DRT). At present, construction is under way in phases 1, 2, and 3, while land for phases 4 and 5 remains vacant. NBCC, which is overseeing the Supreme Court-monitored completion of Amrapali projects, will take a decision. “Our claims must be settled, or we must be given the flats we paid for. We will file an appeal in Supreme Court,” Bhatia said.
Out of the 1,100 original buyers, only 500 remain, as many have moved to other projects. Bhatia refused to pay his EMIs. “The bank sent me a legal notice, but I challenged it. The courts have given several orders stating that no coercive action should be taken against us,” he said.
Homebuyers have also written to banks, urging them not to damage their CIBIL scores. “Banks tried to settle the loan amount, but I will not accept an unfair settlement. I will continue to fight for justice,” Bhatia said.
In 2015, Prosenjit Datta purchased a 4BHK flat at Mahagun Mezzaria for Rs 2.5 crore. The developer was supposed to hand over possession by Dec 2017. To finance the purchase, he got a loan of around Rs 2 crore under the subvention scheme, which stated no EMI would be payable till possession. However, the project ran into delays. Out of six towers, occupancy certificates (OC) were obtained for four, while construction on the other two was nearly 90% complete before getting stalled.
Till 2020, the builder was paying interest, which amounted to Rs 1.5 lakh per month. After that, the payments ceased, and the burden shifted entirely to buyers. “Since 2021, I have been paying Rs 1.5 lakh per month to the bank,” he said. “If I stop paying, it will destroy my CIBIL score.”
Datta is among those in Supreme Court, seeking relief against financial strain.
Many builders launched subvention schemes between 2015 and 2019 in the city to counter a slowdown in the real estate market. They collaborated with banks to offer interest-free loan options until possession, charging buyers a slightly higher price for the flats. Despite Reserve Bank of India prohibiting such innovative home loan schemes, subvention plans continued.
