Subvention Scheme Gone Wrong - Bank Is Asking Me for EMIs

It was sold as the easy way in. Pay 10% or 20% now, the bank pays the builder the rest as construction goes up, and the builder covers the interest on your loan until you get the keys. No EMIs, no pre-EMIs, nothing to worry about for two or three years. Thousands of buyers across NCR, Mumbai and other cities signed up for these subvention schemes between roughly 2012 and 2019.

Then the project slowed down, the builder ran short of money, and the payments to the bank stopped. One day a letter arrives from the bank, or a call from a collection agent, asking you to pay EMIs on a loan for a flat that doesn't exist yet. Your credit score drops. You're told that the agreement you signed makes you liable, whatever the builder promised.

If this is where you are, you're not alone, and you're not without options. This guide explains how subvention schemes worked, why the bank is chasing you, what the law says, and the practical steps you can take, at RERA, with the bank, and in other forums.

How a subvention scheme works

The names varied: subvention scheme, 20:80 scheme, 10:90 scheme, no-EMI-till-possession, pre-EMI free scheme, interest subvention. The structure was usually similar.

• You booked a flat and paid a small part of the price yourself.
• You took a home loan from a bank or housing finance company for the rest.
• You, the builder and the lender signed a tripartite agreement. Under it, the lender disbursed the loan directly to the builder, often in large amounts early on, sometimes regardless of how much construction had been done.
• The builder agreed, either in the tripartite agreement or in a separate letter or memorandum of understanding with you, to pay the interest on your loan (the pre-EMI interest) until a set date, usually the promised possession date.
• After possession, you would start paying full EMIs yourself.

The scheme suited everyone while things went well. The builder got cash early and could advertise a low upfront cost. The lender booked loans. The buyer got a flat without paying rent and EMIs at the same time. The trouble was that the whole arrangement depended on the builder staying solvent and finishing on time. When it didn't, the buyer was left holding the loan.

Why the bank says you must pay

From the bank's point of view, the loan is yours. You applied for it, you signed the loan agreement, and the money was disbursed on your behalf. The builder's promise to pay the interest is, in the bank's eyes, an arrangement between you and the builder. Most tripartite agreements say something like this: the borrower remains liable to repay the loan and interest irrespective of any arrangement with the builder, and any default by the builder doesn't release the borrower.

That clause is why banks feel entitled to demand EMIs from you, report you to credit bureaus as a defaulter, and in some cases start recovery action. It's also why "the builder promised" isn't, on its own, a defence the bank accepts.

But the bank's position isn't as strong as it sounds in every case. Many tripartite agreements also put duties on the bank: to disburse in line with construction progress, to check the builder's approvals, or to inform the buyer of the builder's defaults. Where a bank released most of the loan to a builder at the start, without construction to match, buyers have argued that the bank shares responsibility for the loss. And where the bank and builder had a wider commercial relationship, questions have been raised about whether the bank was really an independent lender at all.

What the courts and regulators have said

Subvention schemes have reached almost every forum over the last decade, and the position has developed in stages. We've summarised the broad trends below. Several of these matters were still being heard as of our last review, so check where things stand before relying on any of it.

RERA authorities

RERA authorities have generally treated the builder's promise to pay pre-EMI interest as part of the deal between the builder and the buyer, and enforceable against the builder. In refund cases, many authorities have ordered the builder to refund the full amount paid towards the flat, including the part paid by the bank from the loan, with interest. Where a loan is outstanding, orders often direct that the bank be paid first from the refund and the balance go to the buyer, so that the buyer's loan is closed. Some authorities have also directed builders to pay the pre-EMI interest they promised, or to reimburse the buyer for EMIs the buyer had to pay.

What RERA usually can't do is order the bank to stop collecting from you. The bank isn't a promoter, and RERA's jurisdiction over it is limited. That's why RERA is the right place for your claim against the builder, but not always enough on its own.

High Courts

Several High Courts, including the Delhi High Court, have heard petitions by groups of buyers asking for protection from banks while the builder's default was sorted out. In some, courts granted interim relief, for example restraining banks from taking coercive steps or from reporting buyers adversely to credit bureaus while the matter was pending. In others, the courts declined, holding that the loan was a private contract between the buyer and the bank. Outcomes have depended heavily on the facts, especially on what the tripartite agreement said and how the loan was disbursed.

The Supreme Court

A large batch of petitions from NCR buyers in subvention schemes reached the Supreme Court. In 2025 the court, concerned about what it described as a nexus between some builders and lenders, directed the CBI to carry out inquiries into the arrangements in a number of projects. Interim protection from coercive recovery was granted to buyers in some of these matters. This is a fast-moving area, and the final directions may change what buyers can expect, so take current advice.

Regulators

Housing finance regulators have also stepped in over the years. The National Housing Bank, for instance, directed housing finance companies around 2019 to stop disbursing in a way that didn't follow construction progress under such schemes. These directions mostly apply going forward and don't automatically help buyers whose loans were disbursed earlier, but they're useful in arguing that a lender which released money far ahead of construction didn't follow good practice.

Your options, step by step

There's rarely one solution. Most buyers we help use several of these at once.

1. Get your papers together

Find the tripartite agreement, your loan agreement and sanction letter, the builder's subvention letter or MoU, your allotment letter and builder-buyer agreement, all payment receipts, and the bank's loan account statement showing each disbursement and each interest payment, and who made it. The disbursement dates and amounts, compared with construction progress at the time, are often the most important evidence. Our checklist of documents for a RERA complaint covers most of these.

2. Write to the builder and the bank

Send the builder a notice demanding that it clear the pending interest and keep paying under the scheme. Send the bank a letter explaining that the builder has defaulted, enclosing the subvention papers, asking it to recover from the builder under the tripartite agreement, and asking it not to report you adversely while the dispute is resolved. Keep it factual. Ask the bank for a full statement of disbursements, and copies of any construction or approval checks it carried out before releasing money. A formal legal notice often gets a faster response.

3. Decide what you want from the builder

If the project looks like it will be finished and you still want the flat, you can claim delay interest from the due date and reimbursement of the pre-EMI interest the builder failed to pay. If it doesn't, or you've lost confidence, you can ask for a full refund with interest under Section 18 of RERA, with the loan closed from the refund. Our guide on refund vs delay interest walks through the choice.

4. File a RERA complaint

Your RERA complaint should set out the scheme, the builder's promise to pay interest, its default, and what you've had to pay as a result. Ask for:

• A refund of everything paid towards the flat, including the amount disbursed by the bank, with interest at the prescribed rate (or delay interest, if you're staying).
• A direction that the builder pay the bank directly to close your loan, with the balance paid to you.
• Reimbursement of every EMI or pre-EMI you've paid that the builder had agreed to cover, with interest.
• Where appropriate, compensation for losses and harassment before the adjudicating officer.

Add the bank as a party, or at least notify it, so that it knows about the complaint and any order can be worked out with it. See our subvention scheme service. Where many buyers in the same project are affected, a group complaint can be more efficient.

5. Deal with the bank

This is the hard part, because the bank will usually keep asking for EMIs until something changes. Some practical points:

• Don't simply stop paying without a plan. Defaulting can lead to your account being classified as a non-performing asset, damage to your credit score, and recovery action. If you can pay while the dispute is resolved, it's often the safer course, and the money can be claimed from the builder.
• Ask for restructuring or a moratorium if you can't pay. Banks sometimes agree, especially where many borrowers in the same project are affected.
• Complain to the bank's grievance officer, and if that fails, to the Reserve Bank's Integrated Ombudsman. The ombudsman is free and can look at deficiencies in service, such as failure to follow the tripartite agreement or to respond to complaints. It doesn't decide large disputes about liability, but it can help.
• Consider a consumer complaint against the bank as well as the builder, where the bank's conduct was itself a deficiency in service. Consumer commissions can deal with both together. See RERA or consumer court.
• Consider a writ petition where many buyers are affected and coercive action is threatened, especially in light of the Supreme Court's involvement in NCR cases.

6. Protect your credit record

If the bank reports you as a defaulter, your credit score can fall sharply, which affects future loans. Write to the bank asking it to correct the reporting where you have a genuine dispute, and raise a dispute with the credit bureau as well. Under the Credit Information Companies (Regulation) Act, 2005, credit bureaus must deal with disputes about the accuracy of information, though they rely on the lender to confirm or correct it. Where a court or authority has granted interim protection, send a copy to the bank and the bureau.

7. If the builder is in insolvency

If the builder has been admitted into insolvency, your RERA case will be paused by the moratorium. File your claim in Form CA, setting out both the amounts you paid and the interest the builder failed to pay. The bank may file its own claim based on the tripartite agreement. Make sure the two aren't counted in a way that leaves you paying twice. Our guide on builder insolvency explains the process.

A worked example

Here's a made-up example. In 2016, Rohit booked a Rs 80 lakh flat in Gurugram under a 10:90 scheme. He paid Rs 8 lakh. His bank sanctioned a loan of Rs 72 lakh and, under the tripartite agreement, disbursed Rs 58 lakh to the builder within the first 14 months, when the tower had only reached its foundations. The builder promised in writing to pay the pre-EMI interest until possession, due in 2019.

The builder paid until mid-2018, then stopped. The bank wrote to Rohit asking for monthly payments of about Rs 48,000. Rohit paid for a while, then fell behind. His credit score dropped.

Rohit gathered his papers and found that the bank's own statement showed the disbursements far ahead of construction. He sent notices to both. He then filed a RERA complaint asking for a refund. The authority ordered the builder to refund the full Rs 66 lakh paid towards the flat (his Rs 8 lakh and the bank's Rs 58 lakh) with interest, to pay the bank first so as to close the loan, and to reimburse the interest Rohit had paid himself.

At the same time, he complained to the bank about the disbursements and the credit reporting, and escalated to the ombudsman when the bank didn't respond. The bank agreed to freeze penal charges while the RERA order was executed. The builder didn't pay, so Rohit applied for a recovery certificate. It took another year, but the loan was closed from the recovery and his credit record corrected.

The details in your case will differ. The point of the example is that the RERA complaint against the builder and the conversation with the bank happen in parallel, and both matter.

Questions to ask about your own scheme

• Who exactly promised to pay the interest: the builder in the tripartite agreement, or only in a side letter? Both are enforceable against the builder, but a promise in the tripartite agreement may also bring in the bank.
• Did the tripartite agreement require the bank to disburse according to construction stages?
• How much did the bank disburse, and when, compared with progress on site?
• Did the bank tell you when the builder stopped paying, or did you find out from a demand letter?
• Did the builder offer a buy-back or an assured exit, and if so, on what terms?
• Is the project registered with RERA, and what does its project page say about progress?
• Is the builder in insolvency or close to it?

Mistakes to avoid

• Ignoring the bank's letters. Reply in writing, every time. Silence lets the bank say you didn't dispute anything.
• Agreeing to a new loan or top-up to "fix" the arrears without understanding the terms.
• Signing a settlement with the builder that releases it from the interest obligation in return for vague promises.
• Waiting for the builder to "sort it out". Interest and penal charges grow every month, and time limits for some remedies keep running.
• Filing only against the builder when the bank's conduct is part of the problem, or only against the bank when the builder is the one who promised to pay.

Buy-back promises and time limits

Some subvention deals came with an extra sweetener: a buy-back or assured exit, where the builder promised to repurchase the flat at a higher price after a few years, or to repay the loan if the buyer wanted out. These promises are often in side letters rather than the main agreement. They can be enforceable against the builder, but they rarely bind the bank, and a builder that has stopped paying interest is unlikely to honour a buy-back without an order. If you have one, include it in your RERA complaint and your notice to the builder.

On time limits, RERA itself doesn't set a fixed limitation period for complaints, and authorities have generally treated a continuing failure to deliver possession as a continuing wrong. Consumer complaints, on the other hand, have a two-year limit from when the cause of action arises, subject to condonation, and claims against a bank in civil courts have their own limits. Our guide on how long a RERA complaint takes covers the practical timelines. The safest course is not to wait: file while your documents and the facts are fresh, and while the builder still has assets to pay from.

Is a subvention scheme ever safe?

Schemes like this are much less common now than they were, partly because of regulatory changes and partly because of the problems described above. If you're offered something similar today, the basic questions are the same. Is the project registered with RERA, and is it on track? Does the loan disburse strictly in line with construction stages, certified by an architect or engineer? Is the builder's promise to pay interest in the tripartite agreement itself, and does the bank have a duty to tell you if the builder defaults? What happens if possession is delayed beyond the date to which the builder has promised to pay? And can you afford the EMIs yourself if the builder stops? If the last answer is no, the scheme is a bigger risk than it looks. Our agreement review service can look over the papers before you sign.

The bottom line

When a builder stops paying under a subvention scheme, the bank will usually look to you first, because the loan is in your name. That doesn't mean you have to absorb the loss. Gather your papers, write to both the builder and the bank, file a RERA complaint against the builder for refund or delay interest and reimbursement of the interest it failed to pay, and deal with the bank in parallel through its grievance process, the ombudsman and, where needed, the courts. Act early, keep everything in writing, and don't let the arrears grow while you wait.

Frequently asked questions

The builder promised to pay my EMIs. Why is the bank asking me?

Because the loan is in your name, and most tripartite agreements say you remain liable whatever the builder promised. The builder's promise is enforceable against the builder, usually through RERA.

Can RERA order the bank to stop asking me for EMIs?

Usually not directly, because the bank isn't a promoter. RERA can order the builder to refund your money, pay the bank to close the loan, and reimburse the interest you paid.

Should I stop paying the EMIs?

Think carefully before you do. Default can damage your credit score and lead to recovery action. If you can't pay, talk to the bank about restructuring and get advice on interim protection.

Will a refund order cover the amount the bank paid to the builder?

Generally yes. RERA refund orders often cover the total paid towards the flat, including loan disbursements, with the bank's dues settled first.

My credit score has dropped. What can I do?

Write to the bank and raise a dispute with the credit bureau. Send copies of any court or authority order granting protection. Corrections depend on the lender confirming them.

Can I complain about the bank?

Yes. Start with the bank's grievance officer, then the RBI's Integrated Ombudsman. A consumer complaint or writ petition may be possible where the bank's own conduct contributed to the loss.

What if the builder is in insolvency?

File your claim in Form CA, including the unpaid interest. The RERA case pauses during the moratorium. Keep dealing with the bank separately.

This guide gives a general overview of subvention and similar home loan schemes and the remedies available to buyers. The law in this area has been the subject of ongoing proceedings, including before the Supreme Court, and your loan documents will matter a great deal. It isn't legal or financial advice for your situation.