Jai_Singh

3. Subvention plan for 24 months mean that from 25th month, you'll have to pay EMI, whether or not your have got possession of property.


Exteeemly good point....Well said CA Rajeev. I didnt think about it even though i dont like subvention scheme.

It would be a tail of horror.....buyers under 85% debt and paying full emi for a project where even the excavation might not have started...forget being complete.

I thinks this single point should be good enough for buyers to avoid subvention scheme......

CA Rajeev

Subvention plan is almost wat Down Payment Plan is... The only difference is that for some limited period (say 2 or 3 years), Builder pays the Pre-EMI instead of you paying the same. Just to analyze, you can simply compare total of Pre-EMI for 24 months (or period as applicable) with the Discounts under Cash Down plan.

This will give you good idea if at all you wish to go for Cash Down / Subvention. Other things like Loan in your name, Risk of Project Delivery etc. remain the same in both plans.

Munish Malhautra

Subvention plan is good if the builder gives an option of "NO EMI TILL POSSESSION" and not restricted to 2 years. what happens is builder delays beyond 2 years? Look for projects which offer subvention scheme till possession as that is what ensure timely delivery.
Also it would show confidence(constro and funds) of a builder in his projects

__________________
MM

puneetanand

In my opinion, I haven't seen any builder offering 'No emi till POSSESSION' as this will result huge loss to the builder in case of delays..That is why a lot of buyers shy away from opting for this plan...

deeprupani

Builder who intends to run away. will offer such a scheme But the idea is great. if implemented one could see bookings coming thick and fast......

Jai_Singh

YES IT IS... but problem is that buyers, atleast what i know, are not thinking like this. They are under the impression that it is some god made plan and builders have become saint to favor the buyers....

Such buyers will be hit the most.....

anantv

Lets assume that a flat is priced at 50 L. When the builder starts excavation 40% of the total price becomes due. So you would have some exposure to this even in CLP. At the end of the day, if the builder doesnt handover the possession of the flat in 3-4 years, you are going to suffer, regardless of what plan you choose. I dont buy the argument that 60% total cost exposure to the builder is "a lot" better than 90%. Most people only have 10% cash when buying apartments, if the builder scoots away after taking even 50%, these buyers are doomed for ever.
Having said that, it is definitely foolish to buy, in subvention, flats from builders like Jaypee, that take 2-3 years to even start excavation. Subvention is fine with most good builders that deliver in 3-4 years (or finish upto the top floor in 3 odd years).

Botton line is, if the builder is good (like ashiana for example), buy in subvention if you want to make a quick buck in 2 odd years.
If the builder is average, tread carefully, try and get a good deal in CLP.
If the builder is risky to deal with, dont buy at all. No point in even buying in CLP and then pretending to be smart.

puneetanand

Guys - pls help me understand this subvention scheme better. Heres my understanding. Let me make up a simple scenario-

Cost of flat - 40 lacs, Interest Cost - 10%, dp discount expected 10%
Estimate project delivery - 3 yrs

Under subvention scheme -
Savings in Interest for the first 3 yrs - Rs 4 lacs p.a * 3 yrs = Rs 12 lacs

Under DP -
Discount offered Rs 4 lacs one time

Net net savings of Rs 8 lacs under subvention....In addition to this by the time the flat is delivered to the buyer, the value of the flat would have atleast appreciated by 15-20% on an average for three yrs..

Under subvention, the risk for the first three years is taken care of as the builder is suppose to make the interest payment to the bank...

Am i missing the catch here???? I am skeptical!!

ThePunjabi

BPTP "The Resort" is a live example of a project where customers have been trapped by subvention scheme.

This project was launched in summers 2008 with 15% booking amount and 2 years of no EMI or interest. That rebate period of 2 years ended in mid-2010 and like every BPTP project, this project is also delayed by a few years. Now builder is promising possession in 2012.

Net result is that customers have been losers from all sides. First of all project was sold at Rs 2200 psf when the prevailing rate in resale for other BPTP projects in the area (like Princess park) as on today is around 1500-1550 psf. So customers bought at a very high price. Now the customers are also paying interest because project is delayed. Result is lots of distressed sales in the market but no buyers.

So I believe subvention schemes are rat traps that are used by builders and brokers to trap unsuspecting customers.

Jai_Singh

Boss mathematics won't work here.....

For me its simple common sense....when we know that builders are always delaying the projects then why go for either DP or Subvention.

Builders are the most dreaded species then why have the become angels over night that they would pay interest on my behalf. THINK ABOUT IT.

Builders are not getting any funds from banks or are getting at very high interest rates approx 20%. In subvention they get money for 11% in a way hence are promoting subvention schemes but one has to use his/her brain on what to choose. one size doesnt fit all.

For a common man and DP and Subvention both are almost same and have high amount of risk