Complaint Against Subvention Scheme Violation Under RERA

“Book a home now, pay later” is one of the most popular types of financial schemes advertised and offered by real estate developers to attract buyers to buy their real estate projects. However, in recent years, a majority of homebuyers that fell of this scheme otherwise known as a Subvention Scheme, have been stuck in a long chase with the builder to get their money back or possession of the property. In August 2019, the National Housing Bank banned subvention schemes and advised housing financiers to desist from funding schemes in which developers offer to service interest on housing loans on behalf of borrowers, citing the prevalence of fraud in them. This blog sheds light on Subvention schemes, the risks associated with such schemes and how to deal with subvention scheme fraud in RERA.

What Is A Subvention Scheme?

A subvention scheme is a financial plan wherein the buyer pays some per cent of the total property value at the time of booking the property. This amount includes registration fees, stamp duty, GST etc. After the initial payment or a couple of payments, the bank or the financial institute pays the remaining amount of the property at various stages of construction, making it a construction-linked plan.

Once a certain amount of payment is done, the buyer pays the remaining amount along with the bank equally at the time of possession. The cost of interest is borne by the builder for a limited period and the buyer can repay the amount to the bank in EMIs later.

File A Complaint Under RERA

Subvention Schemes Under RBI Rules

Subvention plans were banned by RBI on 3rd September 2013. However, these schemes were revamped and given the form of construction-lined plans. Since the subvention schemes are banned by the RBI, the scheme is mostly offered by housing finance companies that do not come under the purview of RBI rules and guidelines.

Subvention Scheme Fraud

The most common fraud faced by homebuyers under Subvention scheme is the non-payment of EMI by the builder. In most cases, the builder stopped paying EMI to the financial institution as was no guarantee or provision for the builder to pay the EMI on time.

This is so because the tri-party agreement signed between the builder, buyer and the loan provider for such schemes is generally not drafted by a good RERA lawyer and does not comprise of the terms and conditions that protect the homebuyer or put the liability on the builder. Most builders get away with providing a template agreement or no agreement at all. In the end, it is the homebuyers that suffer and struggle to get their initial payment amount back.

Another common problem faced by homebuyers under subvention plans is the delay in property possession by the builder. If there is a delay in the project, the cost of the property increases for the buyer. In case of delayed possession of property, the buyer is required to pay the pre-EMI without actually getting possession and when the buyer defaults on such payments, the financial institution holds the buyer liable for delayed payments.

How To File A RERA Complaint Against Violation Of Subvention Scheme?

In cases of violation of the subvention scheme by the builder, the RERA Authority has the power to decide and dispose of the matters. As per the provisions of the RERA Act, if the builder is not giving possession on time then the homebuyer can file a RERA Complaint with the RERA Authority.

A RERA Complaint relating to the subvention plan against the builder can be filed in the following cases

  1. When the builder is not paying EMIs under the subvention scheme.
  2. The builder is not buying back the property as promised in the terms and conditions of the subvention scheme agreement.
  3. When the builder is not cancelling the flat booking.

RERA is the best and most expeditious remedy for homebuyers to get justice from the builder when they violate the subvention scheme and delays the possession of the property.

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