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Mumbai: Subvention scheme ban: 8% projects floated in Q2

ANAROCK Property Consultants in its report said that out of the total 280 projects launched in the April-June quarter of 2019, only about 23 projects (8%) were marketed under subvention schemes.

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The National Housing Board's (NHB) recent directive to housing finance companies (HFCs) to refrain from giving loans under subvention schemes was not as crippling as was initially assumed. ANAROCK Property Consultants in its report said that out of the total 280 projects launched in the April-June quarter of 2019, only about 23 projects (8%) were marketed under subvention schemes. These 23 projects comprised of 7,620 units – about 11% of the total 69,000 units launched in the quarter.

“A deep-dive into this data reveals that Mumbai Metropolitan Region (MMR) has the maximum number of projects affected by the subvention scheme ban, with as many as 17 projects offering various schemes – the most prominent being the 5:90:5 scheme. Affected projects in MMR collectively accounted for 5,310 new units. Bangalore came a distant second with just four new housing projects (1,310 units) being marketed with subvention schemes,'' said ANAROCK in its report. 

ANAROCK Property Consultants chairman Anuj Puri said, “The ban on subvention schemes will contribute to the sector's overall liquidity issues as players can no longer use them to attract customers. Our data also reveals that among the affected projects, those by larger players strongly backed by financial lenders while offering such schemes outnumbered projects by smaller developers.”

The Scheme

As reported by DNA, NHB in July had directed HFCs to disburse loans procured under subvention schemes according to the stage of construction of the project. It had also recommended that financiers desist from making up-front disbursals for under-construction projects.

According to the report, the impact of the ban on subvention schemes is minimal primarily because as early as 2013, the RBI had already curbed banks' upfront disbursement to developers offering such schemes for under-construction or greenfield projects. Popular subvention schemes at the time included 20:80 or 25:75 payment plans wherein buyer paid 20-25% upfront while the developer paid the remaining 80% to the lending HFCs or banks on behalf of the buyer, until possession.

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