East Bengaluru buyer answers
Are subvention (no-EMI-till-possession) schemes safe?
By Gaurav Mongia, acre&key · Published 17 Oct 2026 · Updated 17 Oct 2026
Direct answer: They can work, but the loan is still in your name. If the builder stops paying the pre-EMI it promised, the bank looks to you, and RBI warns your credit score can suffer. RBI also says bank disbursal must follow construction stages, not go upfront. Read the tripartite agreement and plan for the builder missing payments.
Disclosure: acre&key’s advice is free to buyers; we are an authorised sales partner for some projects and may be paid by the developer.
Verify with your lawyer: This page explains the RERA Act and RBI instructions as published, not legal advice. Have your own property lawyer review the documents for your specific flat before you sign, pay or file anything.
"Pay 20% now, nothing till possession." Offers like this show up on hoardings and in sales pitches across Bengaluru, especially for under-construction towers. They sound like the builder is carrying your loan. Legally, that's not quite what happens, and the gap is where buyers get hurt.
What is a subvention scheme?
In a typical scheme, you pay a small share of the price, take a home loan for the rest, and sign a three-way (tripartite) agreement with the bank and the builder. The builder agrees to pay the interest or EMI on your loan until possession or for a set period.
RBI described these products in its Master Circular on Housing Finance: upfront disbursal of sanctioned loans to builders "without linking the disbursals to various stages of construction", and "Interest/EMI on the housing loan availed of by the individual borrower being serviced by the builders during the construction period". It notes they are "popularly known by various names like 80:20, 75:25 schemes" (RBI Master Circular, Housing Finance, 1 April 2025, para 4).
Who owes the bank if the builder stops paying?
You do. The loan is sanctioned to you, so the repayment obligation sits with you even while the builder is paying on your behalf. What the builder owes you depends on what the tripartite agreement and your agreement for sale say.
RBI spells out the risks for borrowers: "dispute between individual borrowers and developers/builders, default/ delayed payment of interest/ EMI by the developer/ builder during the agreed period on behalf of the borrower, non-completion of the project on time". It adds that delayed payments by builders "may lead to lower credit rating/ scoring of such borrowers by credit information companies", because loan servicing data goes to credit bureaus regularly.
So a builder who falls behind can leave you with missed-payment marks on your own credit report, on a flat you can't yet live in.
What does RBI say banks must do?
The circular says disbursal of housing loans to individuals "should be closely linked to the stages of construction of the housing project / houses and upfront disbursal should not be made in cases of incomplete / under-construction / green field housing projects". There's one exception: for projects sponsored by government or statutory authorities with no past history of non-completion, banks may follow that authority's payment stages.
RBI has since moved its credit instructions into Directions issued in November 2025. The version for regional rural banks repeats the same rule as a "shall": disbursal "shall be closely linked to the stages of construction" and upfront disbursal "shall not be made" for under-construction projects (RBI, Regional Rural Banks – Credit Facilities Directions, 2025, paras 99–101). Ask your own lender, in writing, how it will release money for your flat.
Home loan sanction vs disbursement explains the gap between approval and payout.
Is a subvention plan the same as a construction-linked plan?
No. In a construction-linked plan, your payments (and the bank's disbursals) follow the building's progress. In a subvention plan, the difference is who services the loan interest during construction. The disbursal itself should still track construction stages under RBI's rule. See construction-linked vs time-linked payment plans and how a home loan for an under-construction flat is released.
What should I check before signing?
- Read the tripartite agreement in full. Look for how long the builder pays, what happens if possession is late, and whether the builder's obligation ends on a fixed date even if the flat isn't ready.
- Ask what happens if the builder defaults. Does the bank notify you? How quickly? Can you pay directly to protect your credit record?
- Check the disbursal schedule. It should be tied to construction stages. Ask the bank to confirm in writing that nothing will be released upfront.
- Match it with your agreement for sale. Section 13 of the RERA Act bars a builder from taking more than 10% of the cost as an advance or application fee before a written, registered agreement for sale. Our guide on checking the builder's sale agreement goes clause by clause.
- Check the project on the RERA portal. Confirm the registration, the declared completion date and the quarterly progress updates. Here's how to check a project on the Karnataka RERA website.
- Watch your credit report. Check it every few months during construction, so a missed builder payment shows up early.
Is the price higher on a subvention plan?
It can be. Someone pays the interest during construction, and a builder may build that cost into the price. Compare the total cost under the subvention plan with the same flat on a construction-linked plan, including any charges listed separately. Don't compare EMIs alone.
What does RERA give me if the project is delayed?
RERA's remedies run between you and the builder, not between you and the bank. If the builder fails to give possession by the date in the agreement, section 18(1) lets you withdraw and get back the amount paid with interest and compensation, or stay in the project and be paid "interest for every month of delay, till the handing over of the possession". Your loan stays your obligation either way, so ask your lawyer how a refund would flow back to the bank under your tripartite agreement.
RERA also requires builders to keep 70% of the money collected from buyers in a separate account for the project's construction and land cost (section 4(2)(l)(D)). See RERA's 70% rule. If the builder breaches the agreement or the Act, you can file a complaint with Karnataka RERA.
If the builder is in financial trouble, homebuyer rights in builder insolvency explains the IBC route.
Frequently asked questions
What is an 80:20 home loan scheme?
You pay about 20% of the price, a bank lends the rest under a tripartite agreement, and the builder pays the interest or EMI until possession or a set date. RBI's housing finance circular lists 80:20 and 75:25 as common names.
If the builder stops paying my pre-EMI, do I have to pay?
Yes. The loan is in your name, so the bank can look to you. RBI warns that delayed builder payments can lower your credit score.
Can a bank release my whole loan to the builder upfront?
RBI's instructions say disbursal to individuals should be linked to construction stages, and upfront disbursal should not be made for under-construction projects, with an exception for some government-sponsored projects.
Are subvention schemes banned?
The RBI text quoted on this page does not ban them. It restricts upfront disbursal and asks banks to make borrowers fully aware of the risks and liabilities.
Does RERA protect me if the project is delayed?
Section 18 lets you withdraw with a refund, interest and compensation, or stay and receive interest for each month of delay. Your loan remains your liability to the bank.
References
- Reserve Bank of India, Master Circular – Housing Finance, RBI/2025-26/16, 1 April 2025, para 4. https://www.rbi.org.in/scripts/BS_ViewMasCirculardetails.aspx?id=12824, accessed 17 Oct 2026.
- Reserve Bank of India, Regional Rural Banks – Credit Facilities Directions, 2025 (updated as on 1 April 2026), paras 99–101. https://www.rbi.org.in/SCRIPTs/BS_ViewMasDirections.aspx?id=13053, accessed 17 Oct 2026.
- Real Estate (Regulation and Development) Act, 2016, ss. 4(2)(l)(D), 13, 18. https://rera.karnataka.gov.in/resources/staticpage/Real_Estate_Act.pdf, accessed 17 Oct 2026.
This page explains public rules and processes. It isn't legal or tax advice. acre&key gives buyers advice for free. We are an authorised sales partner for some projects and may be paid by the developer.