If you too are looking to buy a flat from a real estate developer you might have come across the offer saying 'No EMI till possession'. Here is detailed the scheme:
Undoubtedly the scheme is more of a marketing gimmick to attract more and more buyers as real estate builders are in a haste to get away with the inventory as well as new projects. In the scheme, property buyer is not required to pay EMIs until actual possession of the property in question is given to them.
In a general case, this scheme comes with a fixed validity of 2-3 years time during which developer or builder of the property is required to give possession to the buyer. And when the possession gets delayed due to some or the other reason, the burden falls on the buyer who then needs to make payment to the buyer.
How the No EMI till possession scheme works?
This scheme works similar to subvention scheme which banks used to grant until a few years ago before RBI scrapped it. For housing finance companies, RBI has not exercised any ban on such subvention schemes.
Under the offer, loan is sanctioned for the property buyer, the builder or developer secures the funds and the lender gets a couple of customers directly from the builder. The buyer in turn gets the payment holiday until possession of the property and during this time builder makes the payment via post-dated cheques on behalf of the buyer.
Typically, no EMI till possession offer is based on the 10:70:10:10 model. While making the booking for the flat, buyer is required to pay 10% upfront towards VAT and property registration. Bank finances the property purchase i.e. about 70% in tranches depending upon the stage of project completion and till the project is complete 80% of the funds are disbursed. And as and when the project gets completed, the bank disburses the remaining 10% balance and property buyer funds 10%.