RERA Rules for Subvention Schemes – A Homebuyer's Complete Guide

Subvention schemes can genuinely ease the financial burden of buying an under-construction home, but they have also caused real financial strain for buyers when projects were delayed or developers defaulted on their EMI commitments. RERA's specific rules around these schemes exist precisely to close those gaps.

This page covers:

• What a subvention scheme is and how it works
• RERA's 6 key rules governing subvention schemes
• Benefits of RERA-compliant subvention schemes
• Risks that remain despite RERA protections
• How to ensure compliance before signing a subvention agreement
• How home loan financing interacts with a subvention arrangement

A subvention scheme is a financing model specifically for purchasing under-construction properties. Under this arrangement:

• The buyer pays a small percentage of the property cost upfront, typically 10-20%
• The remaining amount is funded through a home loan, with the developer agreeing to bear the interest payments until the buyer takes possession

These schemes attract buyers by significantly reducing the immediate financial burden compared to a standard payment plan. However, they also carry real risk — particularly when a project is delayed or, in worst cases, abandoned, leaving the buyer exposed to obligations the developer was supposed to cover.

The Real Estate (Regulation and Development) Act, 2016 (RERA) aims to protect homebuyers from the potential pitfalls of subvention arrangements. The key rules are:

• Mandatory registration. Every real estate project must be registered under RERA before offering a subvention scheme. Buyers should always verify a project's RERA registration to confirm legal compliance and transparency before signing anything.
• Disclosure of payment plans. Developers must clearly disclose the complete payment plan, including the full structure of the subvention scheme, so buyers understand their financial obligations at every stage of the arrangement.
• Prohibition of false promotions. Developers cannot advertise subvention schemes as "no-cost" or "free EMI" unless they genuinely cover all associated costs, including any hidden charges. Misleading promotional claims can attract RERA penalties.
• Completion timelines. Developers must provide realistic possession timelines and adhere to them. RERA penalises developers for project delays, helping ensure buyers are not left paying EMIs indefinitely while waiting for an overdue handover.
• Escrow account regulations. RERA mandates that developers maintain 70% of project funds in a dedicated escrow account. This ensures that money collected from buyers — including subvention scheme payments — is used solely for construction and land costs, not diverted elsewhere.
• Buyer protection in case of defaults. If a developer defaults on their committed EMI payments under a subvention scheme, RERA allows the buyer to file a formal complaint and seek compensation, providing a legal remedy against the resulting financial loss.

• Financial relief: Buyers avoid the dual burden of paying both rent and EMIs during the construction period
• Transparency: RERA ensures developers disclose all costs, timelines, and terms upfront, before any commitment is made
• Accountability: Developers are held formally responsible for delays and mismanagement
• Legal recourse: Buyers retain the right to file complaints against non-compliant developers and seek compensation

Even with RERA's framework in place, subvention schemes can still pose risks:

• Project delays: If construction is delayed beyond the agreed timeline, buyers may end up paying EMIs before possession, even if the developer is technically liable for the interim period
• Hidden costs: Unscrupulous developers may attempt to add hidden charges that increase the overall cost beyond what was originally disclosed
• Developer default: If the developer fails to honour their EMI commitments as agreed, the buyer's credit score may suffer in the interim, even while a RERA complaint is pending resolution

1. Verify RERA registration. Check the project's RERA registration number on your state's official RERA portal before proceeding — this single step confirms the project is subject to RERA's full disclosure and accountability requirements.
2. Understand payment terms thoroughly. Ask for a detailed payment schedule and confirm it aligns with disclosed RERA rules. Avoid any agreement with vague or ambiguous payment terms.
3. Check escrow account details. Confirm the developer maintains a dedicated escrow account for the specific project, as mandated under RERA — this adds an important layer of financial security for your payments.
4. Read the builder-buyer agreement carefully. Before signing, review the agreement thoroughly, paying particular attention to clauses related to the subvention scheme structure, including penalties for delays or developer default.
5. Consult a legal expert. If you are unsure about any terms of the scheme, consult a property lawyer before committing — the cost of legal review is small relative to the financial exposure a subvention scheme can create if something goes wrong.

Under a subvention scheme, the home loan itself is sanctioned in your name even though the developer covers the interest until possession — meaning the loan still appears on your credit profile and affects your overall borrowing capacity during this period. If the developer defaults on the agreed interest payments, the obligation to pay reverts to you as the named borrower, regardless of what the subvention agreement promised.

Before entering a subvention scheme, discuss the specific structure with your lender to fully understand your obligations in every scenario — including developer default — rather than relying solely on the developer's representations. Bajaj Finance offers home loans from 7.25% p.a.* with amounts up to Rs. 15 Crore* and tenures up to 32 years. Check your eligibility today.

RERA has meaningfully improved the safety of subvention schemes, but the protections work best when buyers actively verify compliance before signing rather than assuming RERA registration alone guarantees a smooth experience.