Mumbai: The National Housing Board’s (NHB) recent directive to housing finance companies to refrain from giving loans under subvention schemes was not as crippling as was initially assumed. ANAROCK research reveals that out of the total 280 projects launched in the April-June quarter of 2019, only about 23 projects (or 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.
Anuj Puri, Chairman – ANAROCK Property Consultants says, “The ban on subvention schemes will doubtlessly contribute to the sector’s overall liquidity issues as players can no longer use them to attract customers. However, only a limited number of developers were affected by this move. That said, 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 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. Banks were directed to stick to construction-linked disbursals.”
Some of the 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. The 5:90:5 scheme was the most common one on offer.
The increasing number of delayed projects ultimately put buyers in the dock. Moreover, given that HFCs did not fall under the purview of the RBI back then, developers used them as an alternative after the new ruling.
City-wise Impact
A deep-dive into this data reveals that:
- 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 being marketed with subvention schemes.
- Interestingly, both NCR and Pune had only one project each being sold under such schemes.
- Kolkata, Chennai and Hyderabad had zero new project launches offering subvention schemes.
City-wise distribution
| Cities | No. of Projects
(Q2-2019) |
Launched Units
(Q2-2019) |
| Bangalore | 4 | 1,310 |
| MMR | 17 | 5,310 |
| NCR | 1 | 740 |
| Pune | 1 | 260 |
| Grand Total | 23 | 7,620 |
Source: ANAROCK Research
With subvention schemes off the table, developers will have to get creative with differentiated USPs to market their projects and boost sales. There seems to be no relief from the protracted pain the market has been experiencing in recent years.