Subvention

Subvention

The word subvention means a grant of money or aid mostly paid by the government. Under subvention schemes, the developer, typically, keeps the initial payment or down payment low, usually 5-20% of the property value, so that the deal looks easy on the pocket. The rest is paid by the bank in the form of a loan which is disbursed to the developer to continue the construction work.

Importantly, the developer pays interest on the loan till the buyer takes possession of the property or till mentioned in the buyer-developer agreement. Homebuyers can benefit from such schemes because their EMI only begins after the possession of the property has been taken. Developers benefit because such a scheme often increases the saleability of their project.

Under the scheme, banks provide a rebate to exporters of up to 5% on pre-and post-shipment credits. Banks can then avail reimbursement of the subsidized interest from the Reserve Bank of India (RBI).

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