Best Builder Stopped Paying EMIs Under a Subvention Scheme Lawyer

For a few years in the early and mid-2010s, "no EMI till possession" was one of the most common pitches in NCR real estate. Pay 10% or 20% upfront, the bank pays most of the rest to the builder, and the builder pays the interest on your loan until you get the keys. You pay nothing more until possession. The arrangement was called a subvention scheme, and it was usually documented in a tripartite agreement between you, the builder and the bank.

Then, for thousands of buyers, the builder stopped paying. The project stalled, possession never came, and the bank started demanding EMIs from the buyer: for a loan the buyer had taken on the promise that they wouldn't have to pay until they had a home. Credit scores dropped. Recovery calls began. Some buyers were told their loans had been classified as non-performing.

This is one of the most stressful situations a home buyer can face, because there are three parties and each blames the other two. This page explains where you stand legally with the builder and with the bank, and what you can do.

How subvention schemes worked

Details varied, but the typical structure was:

• the buyer booked a unit and paid a small percentage of the price, often 10% or 20%;
• the buyer took a home loan from a bank or housing finance company for most of the balance;
• the bank disbursed a large part of the loan to the builder, sometimes far ahead of construction;
• a tripartite agreement recorded that the builder would pay the interest on the disbursed amount, called pre-EMI interest, until possession, or for a fixed period;
• the buyer would start paying full EMIs only after possession.

Sometimes the tripartite agreement made the builder directly liable to the bank for the pre-EMIs. Sometimes it only recorded the builder's promise to the buyer. Sometimes there was a separate "subvention letter" or "assured payment plan" outside the tripartite agreement. The wording matters a great deal.

The Reserve Bank of India grew concerned about these schemes, and in 2013 cautioned banks against disbursing loans upfront to builders for under-construction projects under such schemes, directing that disbursement should be linked to construction stages. Disbursements made before that, or in breach of it, are part of why many buyers ended up with large loans against projects that were nowhere near complete.

Your rights against the builder

The promise to pay pre-EMIs

The builder's promise to pay pre-EMI interest is part of the bargain under which you bought the unit. If it stops paying, that's a breach of its obligations. Under Section 11(4)(a) of the Real Estate (Regulation and Development) Act, 2016, the promoter is responsible for all obligations under the agreement for sale, and where the subvention arrangement forms part of the agreement or the arrangements around it, RERA authorities have directed builders to pay the pre-EMI arrears or to reimburse buyers who were forced to pay the bank.

Delay and refund

Most subvention projects are also badly delayed. That gives you the ordinary Section 18 choice: withdraw and claim a refund with interest, or stay and claim interest for every month of delay. In a subvention case, a refund often makes particular sense, because the refund can be used to close the loan. Authorities in these cases commonly direct that the refund be paid to the bank to the extent of the outstanding loan, and the balance to the buyer.

Compensation

Where you've had to pay EMIs the builder promised to pay, suffered damage to your credit record, or faced recovery action, those losses can be claimed as compensation before the adjudicating officer under Section 71.

Your position with the bank

This is the harder part, and the part buyers most need to understand clearly.

The loan is still your loan

In almost every subvention arrangement, the loan agreement is between you and the bank. You're the borrower. The builder's promise to pay pre-EMIs doesn't usually change that. So from the bank's point of view, if the builder stops paying, the borrower is still liable. That's why banks start demanding EMIs from buyers.

But the bank's own conduct matters

That isn't the end of the analysis. Several features of these arrangements can affect the bank's position:

• Upfront disbursement. If the bank paid most of your loan to the builder years before construction justified it, especially after the RBI's caution on stage-linked disbursement, that's a serious question about the bank's own conduct.
• The tripartite agreement. Many tripartite agreements gave the bank rights against the builder, such as a right to recover the pre-EMIs from the builder, or a buy-back obligation if the project failed. A bank that didn't enforce its rights against the builder before turning on the buyer may have questions to answer.
• The bank's knowledge. Banks often had a close relationship with particular builders and projects, approving them for loans and promoting the scheme. Where a bank knew or should have known the project was in trouble and kept disbursing, that's relevant.

The Supreme Court's involvement

The problem became large enough that the Supreme Court took up a batch of petitions by NCR home buyers who had booked under subvention schemes. In the course of those proceedings, the Court granted interim protection to buyers in many cases against coercive recovery, and in 2025 it expressed serious concern about the arrangements between certain builders and banks and directed the CBI to inquire into them. Those proceedings are significant, and buyers in subvention projects should check whether their project or bank is covered, and what interim protection applies.

What you can do with the bank

• Write to the bank immediately when the builder stops paying. Explain the subvention arrangement, attach the tripartite agreement, and ask the bank to pursue the builder under its own rights. Ask the bank not to report a default while the builder's liability is being pursued.
• Ask for your loan account statement and the disbursement history, including dates and amounts paid to the builder and the construction stage at each disbursement.
• Complain to the bank's grievance redressal officer, and if that fails, to the RBI's ombudsman under the integrated ombudsman scheme, about unfair conduct such as disbursement in breach of guidelines or reporting defaults without considering the tripartite arrangement.
• Consider a consumer complaint against the bank where its conduct amounts to a deficiency in service, for example disbursing without regard to construction progress or failing to act under the tripartite agreement.
• Correct your credit record: if your credit report shows a default you dispute, you can raise a dispute with the credit information company and the bank.
• Keep paying if you can. This is hard advice, but if you can manage the EMIs while the dispute runs, doing so protects your credit record and prevents the bank from taking recovery steps. Payments you make that the builder should have made can be claimed back from the builder.

Bringing the bank into the RERA case

RERA's jurisdiction is primarily over promoters, allottees and agents, not banks. But authorities have sometimes made banks parties to complaints in subvention cases where the tripartite agreement links the bank's rights to the builder's obligations, so that directions can be given about how a refund is to be routed to the bank and the loan account adjusted. Whether this is possible or useful depends on the authority and the facts. In other cases, the bank-related remedy lies elsewhere, before the ombudsman, a consumer commission or a court, alongside the RERA case against the builder.

Reading your tripartite agreement

Because so much depends on the tripartite agreement, it's worth knowing what to look for. Find the clauses that deal with:

• Who pays pre-EMI interest, for how long, and what ends the obligation: possession, a fixed date, or something else.
• Disbursement: whether the bank was to disburse in stages linked to construction, or on the builder's demand, or upfront.
• The bank's rights against the builder: does the builder undertake to the bank to pay the pre-EMIs? Does it agree to refund the disbursed amount directly to the bank if the allotment is cancelled or the project fails?
• Buy-back or refund obligations: some agreements oblige the builder to buy back the unit, or refund the bank, if possession isn't given by a date.
• Mortgage and security: what security the bank holds, and whether the builder has given any undertaking about the land.
• What happens on default by the builder: does the agreement say the borrower becomes liable for pre-EMIs immediately, or only after notice, or only after the bank pursues the builder?

If the tripartite agreement gives the bank a direct claim against the builder, that's a strong point when you ask the bank to pursue the builder rather than you. If the builder agreed to refund the bank directly on cancellation, a refund order under RERA fits naturally with that obligation.

When the bank has declared your account an NPA

If arrears have built up, the bank may classify your loan as a non-performing asset and threaten recovery under the SARFAESI Act or file a case before the Debt Recovery Tribunal. In a subvention case, there are arguments about whether the classification was fair given the tripartite arrangement and the bank's own disbursement conduct, and whether the security is enforceable against an incomplete flat. These are specialised matters. If you've received a SARFAESI notice or a DRT summons, get advice immediately, because the time limits there are short and strict.

Group action in subvention projects

Subvention problems almost always affect many buyers in the same project, often with the same bank. Group action makes sense on every front: a group complaint against the builder before RERA, coordinated letters and complaints to the bank, and, where the numbers and facts justify it, collective petitions. A bank that might ignore one buyer's grievance letter tends to respond differently to fifty letters from borrowers in the same project, all raising the same disbursement and tripartite agreement issues.

A sample letter to the bank

When the builder stops paying, a written letter to the bank, sent the same week, is one of the most useful things you can do. Adapt this outline to your facts.

Subject: Home loan account [number], unit [number], [project], tripartite agreement dated [date]

I write about the above loan, sanctioned under a subvention arrangement recorded in the tripartite agreement dated [date] between me, [builder] and the bank. Under clause [ ], the builder undertook to pay the pre-EMI interest on the disbursed amount until [possession / date].

I have been informed that the builder has not paid the pre-EMI interest for [month(s)]. I have not received possession, and the project remains incomplete.

I request the bank to: (a) call upon the builder to pay the outstanding pre-EMI interest under the tripartite agreement and exercise the bank's rights against the builder under clause [ ]; (b) provide me with the loan account statement and the dates and amounts of each disbursement to the builder, with the construction stage reported at each disbursement; and (c) refrain from reporting any default against me to credit information companies while the builder's liability is being pursued.

I remain willing to cooperate with the bank, and I reserve all my rights against the builder and the bank.

Send it by email to the bank's official address and to the branch, and by registered post. Keep proof. If the bank responds only with a demand, escalate to the grievance redressal officer named on the bank's website, and then, if needed, to the ombudsman.

What builders argue

"Pre-EMIs were only for a fixed period, which has ended." Sometimes true. Check whether the period was fixed or tied to possession. If it was tied to possession, it hasn't ended.

"The subvention was between the buyer and the bank." If the builder signed the tripartite agreement and promised to pay, it's bound.

"The buyer defaulted on other payments." Check the facts. Even where a buyer missed a payment, that rarely justifies the builder abandoning its pre-EMI obligation entirely.

"We'll pay once the project is funded." That isn't a legal answer, and buyers have heard it for years.

Refund or keep the flat in a subvention case?

The usual refund-or-stay question has an extra dimension here. If you stay, the builder owes you delay interest and the pre-EMI arrears, and you're still carrying a large loan for an unfinished flat. If the builder can't pay, you're exposed on both fronts. If you take a refund, the money goes first to the bank, which reduces or closes the loan, and any balance comes to you.

For many subvention buyers in stalled projects, a refund routed to the bank is the cleanest way out, because it ends the loan exposure. It isn't always the best choice, though. Where the project is close to completion and the builder is likely to finish, staying and claiming arrears and delay interest may be better. And where the builder is insolvent, a refund order may only become a claim in the insolvency, while the loan remains. We'll go through these possibilities with your actual numbers.

Where these matters are heard

Complaints against the builder go to the RERA authority of the state where the project is located: UP RERA, Haryana RERA in Gurugram or Panchkula, or Delhi RERA. Complaints against banks may go to the bank's internal grievance mechanism, the RBI ombudsman, or the consumer commission with jurisdiction. Recovery action by banks under SARFAESI or before the DRT has its own forums and timelines. Where the Supreme Court's subvention proceedings are relevant to your project or bank, interim orders there may affect everything else.

Our approach

We act for buyers on all three fronts, so the strategy against the builder and the response to the bank are coordinated rather than pulling in different directions. The first step is always the same: read the three sets of documents, work out exactly what each party promised, and protect your credit record while the rest is pursued. If you're one of many buyers in the same project with the same bank, a coordinated approach usually gets results faster.

Don't wait for recovery notices

The most common mistake in subvention cases is waiting. Buyers often hope the builder will resume payments, or that the bank will understand. Meanwhile arrears accumulate, the bank's internal process moves towards default classification, and the buyer's options narrow. Write to the bank and the builder as soon as a pre-EMI payment is missed. Early, documented action is what gives you room to manoeuvre later.

An illustration

A simplified, made-up example.

In 2014, a buyer booked a flat in Greater Noida under a 10:90 subvention scheme for Rs 50 lakh. She paid Rs 5 lakh, and her bank disbursed Rs 40 lakh to the builder within the first year, though only the foundation had been laid. Under the tripartite agreement, the builder was to pay pre-EMI interest until possession, due in 2017. It paid until 2018 and stopped. The bank began demanding EMIs of about Rs 40,000 a month. The project is about 40% built in 2024.

Against the builder, she can file before UP RERA seeking a refund of Rs 45 lakh with interest under Section 18, routed first to the bank to clear the loan, plus reimbursement of EMIs she's paid since 2018 under the builder's subvention promise, and compensation. Against the bank, she can raise the upfront disbursement against a project at foundation stage, and the bank's failure to enforce the tripartite agreement against the builder, through the bank's grievance process, the ombudsman or a consumer complaint. She should also check whether her project or bank falls within the subvention cases before the Supreme Court and any interim protection there.

How we approach subvention cases

1. Read all three sets of documents: the builder-buyer agreement, the loan agreement, and the tripartite agreement or subvention letter.
2. Map the money: what you paid, what the bank disbursed and when, what the builder paid as pre-EMI and when it stopped, and what you've paid since.
3. Check the construction stage at each disbursement, using the builder's demand letters and the RERA quarterly updates.
4. Protect your credit record with immediate letters to the bank and, if necessary, to the credit information company.
5. File against the builder before RERA for refund or delay interest, reimbursement of pre-EMIs, and compensation.
6. Pursue the bank through the appropriate forum where its conduct supports a claim.
7. Check for wider proceedings, including the Supreme Court subvention matters and any insolvency of the builder.

Documents to gather

• Allotment letter and builder-buyer agreement
• Loan sanction letter and loan agreement
• Tripartite agreement and any subvention letter or assured payment plan
• Disbursement letters and the loan account statement
• Records of pre-EMI payments by the builder, and when they stopped
• Bank demand letters, recovery notices and any NPA notice
• Your credit report
• Payment receipts and bank statements for your own payments
• Builder's construction updates and the project's RERA page

Frequently asked questions

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

Because the loan is usually in your name. The builder's promise is usually an obligation to you, and sometimes to the bank under the tripartite agreement, but it doesn't normally release you from the loan.

Can RERA make the builder pay my pre-EMIs?

Authorities have directed builders to pay pre-EMI arrears or reimburse buyers where the subvention promise forms part of the arrangement under which the unit was sold. The outcome depends on the documents.

Should I stop paying the bank?

Not without careful advice. Stopping payment damages your credit record and can trigger recovery action. If you can pay while the dispute runs, it usually protects you better, and the payments can be claimed back from the builder.

Can I get a refund and close my loan?

Yes. A refund order under Section 18 can be routed to the bank first, to clear the outstanding loan, with the balance to you.

Did the bank do anything wrong?

Possibly. Upfront disbursement unrelated to construction progress, particularly after the RBI's 2013 caution, and failure to enforce the tripartite agreement against the builder, are both questions worth examining.

Is the Supreme Court dealing with subvention cases?

Yes. A large batch of petitions by NCR home buyers under subvention schemes has been before the Supreme Court, which has granted interim protection in many cases and directed a CBI inquiry into builder-bank arrangements. Check whether your project or bank is covered.

My credit score has dropped. What can I do?

Raise a written dispute with the bank and the credit information company, explaining the subvention arrangement. Pursue the builder for reimbursement and compensation for the damage.

What if the builder is in insolvency?

File your claim in the insolvency, including the pre-EMI arrears the builder owed you. Your loan obligations to the bank continue.

General information about subvention scheme disputes. Proceedings in the Supreme Court and regulatory guidance continue to develop; check the current position. Not legal advice. The example is an illustration only.