Ban on subvention schemes may hurt sentiments of homebuyers, says Knight Frank

The National Housing Board (NHB) has restricted housing finance companies (HFCs) from financing subvention schemes offered by builders to sell homes. Gulam Zia, executive director for Knight Frank, shared his views on the development.

“It was a marketing tool. If we try and understand why it had happened about four-five years back when developers were in a denial mode and not openly accepting that the markets have started coming down, they were using these subvention schemes to indirectly give a discount. Over a period of time, these subvention schemes went the other way. In the last couple of months, we have seen subvention schemes offered on ready stock which earlier was given only for under-construction property. It was just a discounting thing, a hidden discount is given to a home loan seeker for bringing the property prices down,” Zia told CNBC-TV18 on Monday.

“I think in Mumbai it would be at least 14-15 percent of the mortgages that were happening were under the subvention schemes,” he added.

“Fundamentally this whole thing was to help the demand side versus the consumption side because the buyers were getting that much more comfort to get in and buy those apartments. When prices are coming down, if a consumer who had this as one more reason to buy an under-construction property where the confidence of completion was very low, this will come as yet another blow to the whole industry,” said Zia.

“It will have a huge impact on sentiments of the home buyers who would not find a subvention scheme around and would perhaps run to find some more better schemes out of a developer,” he said.