Status as on: 14/03/2022
Both the terms ‘Subsidy’ and ‘Subvention’, look similar to each other in the terms of meaning, but are they so? The answer to the question is no, though people habitually use such terms interchangeably. But the difference exists!
“Subsidy” is a form of financial aid provided by the government. On the other hand, Subvention Scheme is a type of incentive provided by the developer of the project. The difference between the two is as follows: –
|1. Meaning||A subsidy is a form of financial aid/support provided by the government through various schemes, to the homebuyers as well as to the developers for the production and growth of the Real Estate Sector.||
Under Subvention Scheme, the developer of the project promises to pay the EMIs of the Homebuyer’s Loan for a certain period, generally till possession of the project, by enforcing a tripartite agreement.
The purpose of the government is to –
i. Provide individuals shelter
ii. Growth & development of the Real Estate Sector
The sole purpose of the subvention scheme is to increase the sales of the project launched by the developer.
|3. Benefit||The cost of a Flat/floor gets reduced as per the subsidy plan or is reimbursed and such discount is born by the government.||The allottee gets relief as the EMIs of the loan is paid by the developer|
|4. Examples||Deen Dayal Jan Awas Yojna, Pradhan Mantri Awas Yojna, etc.||N.A.|
|5. Difference in a Layman sense||Some part of the total consideration to be paid is removed or reimbursed in Subsidy||No extra burden to your pocket, generally till possession of the flat, as all the EMIs of the loan would be paid by the developer of the project.|
Myths about Subvention Scheme –
People do have some myths about the subvention scheme which are as follows –
- The Allottee gets something free– However, the allottee gets relief in the loan repayment for a certain period, as the EMIs of such loan is paid by the developer, but that does not make anything free to the allottee.
- Loan is taken by the developer –This is a myth as the actual borrower always remains the allottee, it is the developer who only agrees to pay the EMIs of such loan till the time agreed. And in case of any default by such developer in paying the EMIs of the Allottee/s loan, the allottee shall be responsible for such default.
- Cost of the flat gets reduced –This is a myth, as such there is no discount in the total consideration of the flat, rather developer of the project who pays the EMIs often adds such amount indirectly to the cost of the flat.
- Default in the EMIs payment would affect the credit ratings of the Developer – This is a myth, as the actual loan is taken by the homebuyer only, the developer has only agreed to pay the amount of EMIs on behalf of the Homebuyer for a certain period. And in case the developer makes a default in the payment of such EMIs the CIBIL Score of the Homebuyer i.e., Allottee would be affected and not of the Developer.
It can be observed that both the terms ‘Subsidy’ and ‘Subvention’ directly or indirectly provide some relief to the Allottee/s and that is the only reason that such terms are used interchangeably, however, the difference between the two has been elaborated above.