(Querist) 27 June 2021
This query is : Resolved
I bought a flat in Supertech Ecovillage Noida in 2015 in subvention scheme. As per the allotment letter, it sates that the possession date was in May 2016 which can have another grace period of 6 months. However I have not received possession of the same. The plastering of the building is yet to start.
My subvention loan is in Indiabulls bank who suddenly changed their loan interest rate to 13%. I want to know can I foreclose the loan as its a huge EMI which is going for me.
Even if I want to put up legal case would it stop my EMI or I have to pay bank at any cost. Also I want to know about my credit rating if EMI is stopped. Some in my society has put up a legal case against Supertech but in vain. Either the builder is not paying money or case is still pending.
Wanted your guidance, at this time would it make sense for me to foreclose the loan or it can have any impact if builder doesn't give me possession and I have to put up a legal case?
T. Kalaiselvan, Advocate
(Expert) 30 June 2021
Under subvention schemes, the home buyer, banker and the developer enter into a tripartite agreement where the buyer pays 5-20 per cent of the money upfront. The rest is paid by the bank in the form of a loan which is disbursed to the developer to continue the construction work.
Importantly, the developer pays interest of the loan till the buyer takes possession of the property or till such time as mentioned in the buyer-developer agreement. But a subvention scheme offers a relief in the buyer’s loan interest burden but does not make anything free. The seller often adds the interest to be paid by him to the cost of the product. Some major disadvantages of the subvention scheme are as follows: No incentive for timely completion: Once the builders receive their payments, they don't have any incentive to complete the work on time. This is particularly true in case the builder has agreed to pay interest only for a specific period. The subvention scheme gives an unfair advantage to the developers while jeopardizing the interests of the buyers. In case, the developer stops making payment to the bank on account of the loan, their record is not affected. The loan shows up on the borrower’s personal account. The negative effect of their reckless actions is borne by the buyer’s credit rating. The credit rating of the buyer can take a severe fall thanks to the subvention scheme. Due to limited or lack of exit options, this makes this an illiquid investment that devours a significant amount of cash and poses a great risk to the owner. Therefore you may try to foreclose the loan to avoid bad credit rating or bad CIBIL rating.
(Querist) 02 July 2021
Thank you very much for your guidance. Just one thing where I need follow up guidance - if we put up a legal case in this situation - would it stop my EMIs.
And if I don't foreclose the loan and then the builder goes bankrupt then would my EMIs stop or still I have to pay the bank even if I put a legal case against the builder
T. Kalaiselvan, Advocate
(Expert) 02 July 2021
The repayment of the loan availed through EMI is a totally different subject to that of the proposed legal action that you would initiate to get your grievances redressed. This action will not entitle you to stop paying the EMI loan repayment. The loan was sanctioned to you through the builder on the basis of the purchase of property by you hence you will be ultimately held liable for repayment of the loan amount if the builder fails to repay.