Subvention schemes are targeted at home buyers who avail home loans. There are three stakeholders in a subvention scheme: the buyer, the bank, and the builder. These three parties undergo an agreement wherein the buyer agrees to pay an initial booking amount or the down payment (which is a fraction of the total obligation), the bank agrees to pay the remaining balance to the builder (as a home loan), and the builder agrees to pay interest on the buyer’s home loan as per terms mentioned in their agreement. Banks release the payments to the developer according to the construction schedule.

Subvention schemes bring discipline to what developers do because banks ensure they get paid as per the extent of the construction work accomplished by developers. This gives developers the motivation to deliver possession in a timely manner, so that he could be relieved from paying the loan interest on the home buyer’s behalf. The risk to the buyer, in case the developer fails to deliver possession, is limited to loan amount disbursed as per the construction stage and not the complete loan amount as was in the case earlier.