No EMI till possession scheme: 5 reasons why homebuyers should think twice

A Reddit user has warned that subvention schemes like No EMI till possession trap lakhs of homebuyers. Though the home loan is in their name, builders often delay or abandon projects, forcing buyers to pay EMIs (and rent) for undelivered properties, damaging credit scores and financial stability

As the name suggests, No EMI till possession schemes allow homebuyers to defer their EMI payments until they receive possession of the property. Typically, the developer pays the interest portion of the loan to the bank for a limited period (as agreed), while the principal remains intact.

Also, known as a subvention scheme, it means that the builder temporarily pays the interest on your home loan until you get the house. You don’t pay EMIs during this period.

This might seem like a good offer, but it is not. Let us see why.

1. Project delays mean a double burden

The biggest danger is the financial shock once possession is handed over, when buyers must suddenly start paying full EMIs (principal + interest). If projects are delayed, buyers may also end up paying rent on their current home plus EMIs, a double burden.

“For many, this transition can come as a financial strain, especially if they have not planned for the higher outgo. If possession is delayed, buyers may also end up paying EMI and rent for their current residence, adding to the stress,” says Raoul Kapoor, co-CEO, Andromeda Sales and Distribution.

2. Loan liability never goes away

Even if the developer stops paying EMIs due to financial trouble, the loan is still in your name. That means the bank will chase you for repayment, not the builder. Miss a payment? Your credit score takes a hit, even if the house is never delivered.

If the project stalls or the developer runs into financial trouble and stops paying the EMIs, since the loan is in your name, the banks will recover from you. In case you cannot pay EMIs on time, then your credit score gets affected. As the Redditor mentioned, “If they default, the bank still comes after you. Even if the house isn’t delivered, you must pay. Miss an EMI? Your credit score takes the hit.”

3. EMIs often start before possession

In many cases, EMIs begin well before buyers get the keys, forcing them to service a loan for a property they cannot yet use. Delays only prolong interest outgo, inflate the overall cost of ownership, and even reduce potential tax benefits.

“These delays prolong interest outgo, increasing the overall cost of ownership. Continued delay can also reduce potential tax benefits and slow down the property’s valuation,” says Atul Monga, CEO and co-founder, BASIC Home Loan.

Also Read: Smart property investment strategies: Key mistakes homebuyers should avoid when purchasing an apartment

4. False sense of affordability

Buying a property with such an offer may seem quite lucrative, as you do not have to pay anything up front, so you may be lured into thinking that you can afford a property of a higher value than you can actually afford.

However, when the project is complete, the payment begins, and that is often higher than what one accounted for. Also, things may get worse when possession is delayed.

Also Read: CIBIL score: Do missed EMIs on delayed real estate projects affect your credit rating?

5. Regulatory red flag (RBI ban)

Earlier, many banks and housing finance companies partnered with developers to offer No EMI till possession or ‘subvention’ schemes as they boosted sales.

“However, after concerns were raised about risks to both lenders and borrowers, the Reserve Bank of India (RBI) issued guidelines discouraging such structured subvention schemes,” says Kapoor. Today, most lenders do not support these models, and homebuyers are required to service EMIs as per normal repayment schedules.

What should homebuyers do?

Safer alternatives include construction-linked payment plans that align payments with project progress, reducing delay risks. Ready-to-move-in projects also remove possession uncertainty.

Homebuyers should first assess their financial readiness to ensure they can manage EMIs after possession.

“It’s important to select projects with RERA registration, credible developers, and a history of timely delivery. Opting for construction-linked payment plans, where payments are tied to project progress, can reduce risk in case of delays,” says Kapoor.

Finally, consult financial advisors or loan experts to understand repayment implications and choose options that align with long-term affordability. While no EMI till possession schemes are not common anymore, your developer could be offering you a similar scheme, and it is important to understand what you are getting into.

Anagh Pal is a personal finance expert who writes on real estate, tax, insurance, mutual funds and other topics.

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