When you walk into a new project launch in Pune, the sales team often leads with the payment plan, not the price. “10:90 Sir — pay only 10% now, rest at possession.” “We offer subvention — you don’t pay EMI till you get the keys.” These offers sound compelling but carry significantly different risks, legal standing, and financial implications. Here is a complete breakdown.
What Was the Subvention Scheme?
The original subvention scheme worked like this:
- Buyer pays 10–20% as down payment to the builder.
- Buyer takes a home loan for the balance 80–90%.
- Bank disburses the full loan amount upfront to the builder.
- Builder pays the EMI on the buyer’s behalf until possession.
- After possession, the buyer starts paying EMI.
For buyers, this seemed ideal — no EMI burden during the under-construction period, no pre-EMI interest pile-up. For builders, it provided upfront cash flow even before construction was complete.
Why RBI and NHB Banned It (2017–2018 Circulars)
The National Housing Bank circular (NHB/ND/DRS/Policy Circular/2017/01) and subsequent RBI guidelines effectively prohibited the original subvention structure for the following reasons:
- Banks were disbursing full loan amounts upfront, creating a situation where the loan was unsecured (the flat didn’t exist yet as collateral).
- Builder default risk was concentrated. If a builder became insolvent (as many did post-2015), banks were left with outstanding loans and no collateral while buyers had no flat.
- Moral hazard. Builders used upfront cash for purposes beyond construction — land acquisition for other projects, debt repayment, promoter withdrawals.
- Buyers were not technically making payments, so NPA recognition was deferred — creating systemic banking risk.
After the circulars, banks must disburse home loans based on construction progress, not on time schedules or builder requests. This effectively killed the true subvention structure.
What Builders Offer Today (Legal Alternatives)
1. Construction Linked Plan (CLP)
CLP ties your payment — and bank disbursements — to verified construction milestones.
| Milestone | Typical Payment % |
|---|---|
| Booking / Agreement | 10–15% |
| Excavation / Foundation complete | 10% |
| Plinth / Ground floor slab | 10% |
| Each subsequent floor slab (5–7 slabs) | 5–7% each |
| Top floor / Terrace | 5% |
| Brickwork and plastering complete | 5% |
| Flooring, fitting, painting | 5% |
| Possession and registration | 5–10% |
Best for: Buyers who want disbursement aligned with real progress. Banks inspect construction before releasing each tranche. If construction stalls, your EMI does not increase because the bank has not disbursed the next tranche.
Risk: Slightly higher pre-EMI interest in the early stages, but this is the most financially transparent structure.
2. Possession Linked Plan (PLP)
Also called No Pre-EMI scheme, PLP minimises payment during construction:
| Phase | Payment % |
|---|---|
| Booking | 5–10% |
| During construction | 0–10% (minimal) |
| At possession + registration | 80–90% |
Banks offer this through home loans disbursed at possession. Buyers pay only pre-EMI interest (interest on the disbursed amount) during construction, which is usually small since little has been disbursed.
Best for: Buyers currently paying rent who want to minimise cash outflow before getting the flat.
Risk: The bulk payment at possession can be stressful. Also, if the builder delays possession, your timeline to start EMI extends — which could be good or bad depending on your situation.
3. Flexi / Time-Linked Plans (10:90, 20:80, 30:70, 40:60)
These are structurally similar but vary in how much upfront payment is required:
| Plan | At Booking | During Construction | At Possession |
|---|---|---|---|
| 10:90 | 10% | 0% | 90% |
| 20:80 | 20% | 0% | 80% |
| 30:70 | 30% | 0–10% | 60–70% |
| 40:60 | 40% | 0–10% | 50–60% |
Important legal point: Banks technically cannot disburse 80–90% of the loan at possession unless the flat is near-complete and can serve as collateral. Most legitimate PLP and 10:90 plans in RERA-registered projects work with banks through a negotiated drawdown that aligns with actual construction progress. The marketing says “pay at possession” but the bank disburses in tranches — you just don’t pay pre-EMI beyond the disbursed amount.
Risk: If the builder delays possession, you might be in limbo — the bank has disbursed partially, construction is stalled, and your loan clock is ticking.
4. Builder’s Own EMI Waiver Scheme (Modern “Subvention”)
Some builders — particularly large developers with strong balance sheets — offer to pay your EMI directly for 24–36 months. This is not a bank subvention (which is banned) but a builder-funded rebate or interest subvention from their own accounts.
How to verify: Ask for a written agreement stating that the builder will pay EMI for X months. Understand what happens if they don’t — is there an escrow or guarantee? Without written commitment and a strong developer track record, this is a marketing gimmick.
Comparison: Which Plan Is Right for You?
| Factor | CLP | PLP / 10:90 | Builder EMI Waiver |
|---|---|---|---|
| Safety for buyer | Highest | Medium | Depends on developer |
| Pre-EMI cash outflow | Moderate | Low | Very low |
| Bank acceptance | Universal | Most banks accept | Bank-specific |
| Risk if builder delays | Low | Medium-High | High if builder defaults |
| Best for | Risk-averse buyers | Rent-paying buyers | IT professionals needing 2–3 yr buffer |
| Regulatory status | Fully compliant | Compliant if bank disbursement is progress-linked | Legal but verify terms |
Key Questions to Ask Before Signing
Before committing to any payment plan on a new project in Pune, ask:
- Is the project RERA-registered? (Mandatory. Check on maharera.mahaonline.gov.in.) RERA registration gives you recourse if possession is delayed.
- What is the builder’s track record on delivery? Check their previous projects — did they deliver on time?
- Is the CLP milestone verified by a third party or just self-certified? Banks that inspect the site are safer than those relying on builder declarations.
- If the builder is paying EMI, what is the mechanism? Is it an escrow account, a post-dated cheque, or a vague verbal promise?
- What is the possession date in the agreement vs the RERA-registered date? Builders sometimes give a marketing date that differs from the RERA-committed date.
- What happens to the EMI waiver if the builder is acquired or goes bankrupt? This is a real risk — subvention-like obligations are typically unsecured liabilities of the builder entity.
Practical Checklist Before Choosing a Payment Plan
- Confirm the project’s RERA registration number and check it online
- Review the builder’s last 3 completed projects for delivery timelines
- Get the payment plan in writing with all milestones clearly defined
- Check with your bank if they accept the proposed payment plan
- Calculate total pre-EMI interest outgo under CLP vs lump-sum at possession
- Get a legal review of the sale agreement before signing
- Verify that any EMI waiver from the builder is contractually guaranteed
