RERA Guidelines for Subvention Schemes: A Homebuyer’s Complete Guide

When buying a home, many of us look for financing options that ease the financial burden. One such option is the subvention scheme, where a buyer pays only a portion of the cost upfront, and the builder bears the EMIs till possession. While this seems like a win-win, subvention schemes have sometimes caused financial strain for buyers due to delays or mismanagement by developers.

This is where the Real Estate (Regulation and Development) Act, 2016 (RERA) steps in, bringing clarity and transparency. In this guide, we will explore RERA rules for subvention schemes, their benefits, risks, and how buyers can protect themselves.

What is a subvention scheme?

A subvention scheme is a financing model for purchasing under-construction properties. Here is how it works:

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

These schemes attract buyers by reducing the immediate financial burden. However, they also come with risks, especially if the project is delayed or abandoned.

RERA rules for subvention schemes

RERA aims to protect homebuyers from potential pitfalls in such schemes. Below are the key RERA rules for subvention schemes:

1. Mandatory registration: Every real estate project must be registered under RERA before offering subvention schemes. Buyers should verify the project’s RERA registration to ensure legal compliance and transparency.

2. Disclosure of payment plans: Developers must clearly disclose payment plans, including the subvention scheme structure. This ensures buyers understand their financial obligations at every stage.

3. Prohibition of false promotions: Under RERA, developers cannot advertise subvention schemes as "no-cost" or "free EMI" unless they genuinely cover all costs, including hidden charges. Misleading promotions can lead to penalties.

4. Completion timelines: Developers must provide realistic possession timelines and adhere to them. RERA penalises developers for project delays, ensuring buyers are not stuck paying EMIs indefinitely.

5. Escrow account regulations: RERA mandates that developers maintain 70% of project funds in an escrow account. This ensures the money collected from buyers, including subvention scheme payments, is used solely for construction and not diverted elsewhere.

6. Buyer protection in case of defaults: If a developer defaults on payments under the subvention scheme, RERA allows buyers to file complaints and seek compensation. This prevents financial loss for homebuyers.

Benefits of RERA-compliant subvention schemes

Subvention schemes aligned with RERA guidelines offer several advantages:

• Financial relief: Buyers can avoid the dual burden of rent and EMIs during construction.
• Transparency: RERA ensures developers disclose all costs, timelines, and terms upfront.
• Accountability: Developers are held responsible for delays and mismanagement.
• Legal recourse: Buyers have the right to file complaints against non-compliant developers.

Risks of subvention schemes

Despite their benefits, subvention schemes can pose risks:

• Project delays: If construction is delayed, buyers may end up paying EMIs before possession.
• Hidden costs: Unscrupulous developers may add hidden charges, increasing the overall cost.
• Developer default: If the developer fails to honour their EMI commitments, the buyer’s credit score may suffer.

How to ensure compliance with RERA rules

Here are a few steps you can follow to ensure compliance with RERA rules:

1. Verify RERA registration: Check the project’s RERA registration number on your state’s RERA portal. This ensures the project adheres to RERA guidelines.

2. Understand payment terms: Ask for a detailed payment schedule and ensure it aligns with RERA rules. Avoid vague agreements.

3. Check escrow account details: Ensure the developer has a dedicated escrow account for the project. This adds an extra layer of security.

4. Read the agreement carefully: Before signing, read the builder-buyer agreement thoroughly. Look for clauses related to the subvention scheme, including penalties for delays or defaults.

5. Consult a legal expert: If you are unsure about the scheme’s terms, consult a legal expert to understand your rights and obligations.

Filing complaints under RERA

If you face issues with a subvention scheme, RERA provides a simple complaint mechanism:

1. Log in to your state’s RERA website.

2. Fill out the online complaint form with details of the issue.

3. Attach relevant documents, such as the agreement, payment receipts, and correspondence with the developer.

4. RERA authorities will review your complaint and take appropriate action.

Explore Bajaj Housing Finance Home Loan

Are you planning to invest in a new home but need financial assistance to secure this dream? A home loan is your perfect solution.

A home loan not only simplifies the process of buying your ideal property but also ensures your financial stability. By choosing a RERA approved project, you protect your investment and enjoy the assurance of timely project completion. And with Bajaj Finance, you can turn this secure choice into reality.

Here are a few benefits of opting for a home loan with us:

1. High loan amount: Secure a home loan of up to Rs. 15 crore* to bring your dream home to life.

2. Low interest rates: Enjoy interest rates starting 8.25%* p.a, and EMIs as low as Rs. 741/lakh*.

3. Quick approval: Get approved within 48 Hours* of applying – sometimes even sooner.

4. Flexible repayment tenure: Choose a repayment term of up to 32 years for comfortable EMIs.

5. Simple application: Take advantage of doorstep document collection for a smooth process.

6. Balance transfer facility: Move your existing home loan and get a top-up loan with better terms.

Secure your dream home with a Bajaj Housing Finance Home Loan today. It is your step toward a transparent and worry-free real estate investment.