Real estate basics: All you need to know about Zero EMI till possession scheme

In the current real estate market scenario, a scheme which has become a major selling point for real estate companies is ‘Zero EMI till possession’. Developers and builders are fully utilizing this scheme to woo prospective home buyers with the help of this scheme. So, if you are a prospective homebuyer and planning to invest in your dream home then, read this article to understand this scheme in detail and know its importance and advantages:

What is Zero EMI till possession?

These days to promote any new residential project, the banks, builders and customers get into an EMI agreement through ‘Zero EMI till possession’ scheme. It is also known as ‘Subvention Scheme that works on the principle of 20:80. So, if you are planning to buy a property may be apartment, villa or penthouse, you just have to pay 20% of the total property cost as a down payment. However, banks finance the rest 80% and till the time registration process gets complete and a buyer does not get the possession of the house, developer of the project pay the EMIs for this home loan.  On the other hand, a home Buyer has to pay EMIs only when they have taken possession of the home.

Here, a builder has the option to choose from any of the two kinds of schemes:

• Either, the builder pays a part of the principal amount and the interest on your EMI directly to the bank. This will be in a reducing format for a fixed period of time.

• Or, the builder pays the interest to the bank and the principal amount is directly deducted from your loan account by the bank.

Advantages of Zero EMI till possession scheme

The Scheme is beneficial to everyone may be builder, home buyer or the banks. Let’s understand how:

Builders

The builder gets funding from the banks at a much lower rate of interest i.e. 8-9%, which is much lesser than the commercial rate of interest that they may have to pay for raising working capital.

Home buyers

• This scheme is most beneficial to the home buyers as they get proper time to manage their finances. While paying rent for current house, one can efficiently get resources for the future EMIS of the newly brought property.

• Secondly, this scheme also assured that the property will be completed on time and be handed over to the homebuyer on the given date.

Banks

With the help of this scheme, banks and financial institutions get plenty of clients directly from the builder which is very useful for customer acquisition. Regular return on loan provided will be available plus the chance of default is very minimal. This also helps in deepening relationship with the customers.

Things to keep in mind while availing Zero EMI till possession scheme

The scheme sounds much tempting, but as said that before availing any offer one must keep important factors in mind. These are:

• Also, if the builder is not able to pay the EMI then, the banks ask homebuyers to pay the amount. So, make sure you must complete all the groundwork before opting for this scheme.

• Check the tenure of the scheme. In some projects, the builders only pay EMIs for 2 years, irrespective of the fact that the project is complete or not.

Keep a regular check that the builder must be paying the entire EMI as if they are not doing so, then you must have to pay the entire EMI amount at a much higher point.