If you are a prospective homebuyer and planning to invest in your dream home then, you must have heard a lot about the term ‘Zero EMI till possession’ these days. This scheme has become a major selling point for real estate companies today. In fact, most of the Builders and agents are wooing buyers with the help of this scheme only.
So, let’s understand this scheme in details and know the importance and benefits:
Meaning of Zero EMI till possession
In today’s financial landscape, to promote any housing project, the financers, builders and customers get into an EMI agreement through ‘Zero EMI till possession’ scheme. Also known as ‘Subvention Scheme, this innovative financial structuring scheme 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, the rest 80% will be financed by the banks. The important part is that till the time registration process gets complete and a buyer does not get the possession of the house, the project developer pays the EMIs to the bank for this home loan.
A home Buyer has to pay EMIs only when they have taken possession of their home. However, a builder can opt for any of the two kinds of no EMI 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.
Benefits of Zero EMI till possession
The Scheme is beneficial to everyone may be the bank, the builder, or the buyer. Let’s understand how:
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.
Banks and financial institutions
With the help of this scheme, banks and financial institutions get plethora 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 their relationship with the customers.
- 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.
Factors to keep in mind while availing Zero EMI till possession
The scheme sounds much tempting, but as always said that before availing any offer one must keep important factors in mind. These are:
- 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.
- 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.
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.