Posted by Admin, On 26th August 2022
What is a loan subvention scheme? How does it work?
A subvention scheme in real estate is a legal agreement between buyers and sellers wherein the finance company providing the loan is also included. According to this scheme, buyers won’t pay home loan interest until an agreed period which is mentioned under the contract terms. The scheme is highly beneficial for homebuyers who are on rent and limited finances.
Interest subvention on housing loans
Housing loans up to Rs 10 lakh, interest subvention is 1 % for purchasing a new house or extending an existing house. However, the cost of construction, extension, or the price of the new house should not exceed Rs 20 lakh. The scheme benefits applicants who are staying on rent and have limited income.
Difference between subvention scheme and subsidy
A subvention scheme reduces the buyer’s home loan interest without making anything free, whereas a subsidy is offered by the government wherein the government pays a part of the cost of production of certain goods or services. If interest subvention exceeds Rs 50,000, then taxable. However, an interest subvention program has been launched for the sectors like agriculture, textile, and education, aiming to provide short-term loans with low-interest rates and subsidies.
Advantages and disadvantages of subvention scheme
Under this scheme, homebuyers have to pay just some money upfront as an advance and the rest after a specified time period, enabling them to look for more expensive options and pay later in short payments. A subvention scheme is beneficial if the project is under construction. However, homes brought under subvention schemes can be expensive.
Things to check
1.The financial strength of the builder
2.Clearance details of the project
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