Realtors rain EMI sweeteners
Home loan customers now have a reason to smile even before the Reserve Bank of India’s much-awaited credit policy review on June 18, where the central bank is widely expected to slash rates. Sachin Dave reports.india Updated: Jun 11, 2012 22:46 IST
Home loan customers now have a reason to smile even before the Reserve Bank of India’s much-awaited credit policy review on June 18, where the central bank is widely expected to slash rates.
Under the EMI subvention scheme, also referred to as the 80:20 scheme, customer makes an upfront payment of 20% of the total property price. The customer then takes a loan of the remaining 80% from the bank. Though the EMI start as soon as the loan is taken, it includes only the interest component. The principal amount starts getting deducted from the EMI only after the customer gets possession of the property.
In a bid to increase sales without lowering prices, real estate developers in Mumbai and the National Capital Region (NCR) are offering to pay customers’ EMIs till possession.
“We are offering a scheme where the customer does not lose out on the outgoing interest, we will pay that. And the customer will only be paying the EMI once he gets the possession,” said Vyomesh Shah, managing director, Hubtown, a BSE-listed firm offering the scheme on two of its properties in Mumbai.
And NCR developers are also wooing customers in a similar way. Developers in Noida and Gurgaon including Unitech, Indiabulls and Tata Housing are offering such options.
Unitech, for example, is offering a similar option for one of its projects UniHomes in Noida.
“There is a subvention scheme for phase two where the customer has to pay around 15% upfront, while the bank finances the remaining. The buyer will only be paying installments after the 25th month,” said an Unitech official.
According to industry experts, many small developers in Gurgaon and Noida are also offering similar schemes.
“The scheme solves the cash flow issues for the developer as he is getting full 100% price of the property. There are developers, including Unitech, who have been offering the scheme to customers in Noida,” said Anshuman Magazine, chairman and managing director, South Asia, CB Richard Ellis.
Some analysts, however, advice against opting for the scheme. “The risk of repaying the loan legally rests with the customer not the developer, so customers should only prefer reputed real estate developers who will complete the project in time,” said Ambar Maheshwari, managing director, corporate finance, Jones Lang LaSalle India.
Developers, on the other hand, say these schemes are not the result of lower sales. “We are offering the scheme because it makes it more affordable for the customer to buy a house in Mumbai, and this is not a result of slower sales,” said Shah.