Home loan defaults can put personal wealth in jeopardy. Here is how

Homebuyers who took subvention schemes to buy apartments are seeing a sharp fall in prices. They might — grudgingly— continue to pay loans, but what about people who lost their jobs? That’s where things get messy.

Last week, a very different question on real estate was posed to me – “How costly can a home loan default be?”

Two events in Mumbai real estate have made the question pertinent.

1). Popularity of home purchases via subvention scheme: Earlier, most people bought apartments through a construction-linked plan (CLP). Under this plan, as construction happened, the buyer made his payments or serviced the loan taken for an apartment.

Between 2015 and 2019, things changed and subvention loans became the flavour. Schemes such as 5:80:15 were common. Under the arrangement, a buyer pays 5 percent, a lender then provides 80 percent funding but the pre-EMI until possession is paid by a developer. To provide this facility, the developer increases the total cost of the apartment for the buyer. On possession however, the buyer pays the remaining 15 percent.


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