The traditional 20:80 subvention schemes have proved to be quite popular amongst the property buyers as well as developers. However, with more and more builders offering 20:80 (or similar) schemes, coupled with greater awareness amongst the buyers of the downside of such financing, these schemes have been losing their sheen.
In order to revive the buyer’s interest in such financing schemes, the developers and home financiers have made some innovative changes to such schemes which have once again made them attractive.
Let us look at some of these new financing schemes and see how they benefit the home buyers.
10:80:10 scheme and its variants
Under the conventional 20:80 scheme, the home buyer had to bring in his contribution of 20% of the value of the property upfront. The balance 80% was being financed by bank or housing finance company for which the EMI till possession (or prescribed period) was borne by the developer. In order to make this scheme more attractive, the developers are now asking the home buyers to pay only 10% upfront. The next 80% is financed by the bank for which the developer pays the EMI and the balance 10% the home buyer pays at the time of possession. There are many variations of such scheme such as 5:80:15, 10:75:15, 5:90:5 etc.
Thus, this makes a very attractive proposition for the home buyers who can buy the home by paying just 10%. This not only helps him in financial terms but also gives him a sense of security that he does not have to pay anything except the initial 10% till the time his house is delivered. This is also very attractive for investors as they can get leveraged return on the entire value of the property by contributing just 10% initially.
20:80 schemes without any loan
The conventional 20:80 scheme involved the buyer taking a home loan for which the EMI till possession was being paid by the developer. However, nowadays the developers are offering such payment terms without the buyer having to take any loan. It means that developer takes only 20% of the value of the property upfront and for the balance 80%, the demand is made only at the time of possession.
Paresh Karia, Founder, Easy2ownEstate
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