No EMI Till Possession Scheme Risks: 5 Reasons Homebuyers Must Think Before Investing

At first glance, No EMI till possession schemes may look appealing, offering a breather from immediate loan payments. But beneath the surface, the risks are largely borne by the homebuyer. Once possession is handed over, you are expected to pay the full equated monthly instalments (EMIs), including both principal and interest. And if the developer faces financial trouble or delays, the loan remains in your name, meaning the bank will pursue you - not the builder.

A Reddit user has highlighted the dangers of such subvention schemes, warning that they can “trap lakhs of homebuyers.” Even though the home loan is in your name, builders often delay or abandon projects. This forces buyers to pay EMIs - and rent for their current home - simultaneously, which can severely affect credit scores and financial stability.

What is a No EMI Till Possession Scheme ?

As the name suggests, these schemes allow homebuyers to defer EMI payments until they receive possession of the property. Typically, the developer pays the interest portion of the loan to the bank for a limited period, while the principal remains unchanged.

Also called a subvention scheme , this means the builder temporarily covers the interest on your home loan. You don’t pay EMIs during this period, which may seem attractive - but it comes with hidden risks.

1. Project Delays Lead to Double Financial Burden

The biggest challenge comes when possession is finally handed over, and buyers suddenly need to pay full EMIs. If projects are delayed, buyers may end up paying rent for their current home along with EMIs for the new property - a financial double whammy.

“For many, this transition can come as a financial strain, especially if they have not planned for the higher outgo. If possession is delayed, buyers may also end up paying EMI and rent for their current residence, adding to the stress,” says Raoul Kapoor, co-CEO of Andromeda Sales and Distribution.

2. Loan Liability Always Remains Yours

Even if the developer stops paying EMIs due to financial issues, the loan remains in your name. That means banks will hold you responsible, not the builder. Missing payments can hurt your credit score, even if the property is never delivered.

As one Redditor warned, “If they default, the bank still comes after you. Even if the house isn’t delivered, you must pay. Miss an EMI? Your credit score takes the hit.”

3. EMIs May Start Before Possession

In many cases, EMIs kick in before buyers actually receive the keys. This forces them to service a loan for a property they cannot yet use. Delays increase interest costs, inflate the total cost of ownership, and can reduce potential tax benefits.

“These delays prolong interest outgo, increasing the overall cost of ownership. Continued delay can also reduce potential tax benefits and slow down the property’s valuation,” says Atul Monga, CEO and co-founder of BASIC Home Loan.

4. Creates a False Sense of Affordability

Such schemes may tempt buyers to pick properties beyond their financial capacity because there’s no upfront EMI burden. However, when the project is complete, the full payments start - often higher than what buyers anticipated. Delays only exacerbate the situation.

5. Regulatory Concerns (RBI Ban)

Earlier, many banks and housing finance companies offered No EMI till possession schemes to boost sales. However, due to the risks posed to both lenders and borrowers, the Reserve Bank of India (RBI) issued guidelines discouraging such structured subvention schemes.

“Today, most lenders do not support these models, and homebuyers are required to service EMIs as per normal repayment schedules,” adds Kapoor.

What Are Safer Alternatives?

Homebuyers can consider construction-linked payment plans , which align payments with project progress and minimise delay risks. Ready-to-move-in properties remove uncertainty around possession.

“It’s important to select projects with RERA registration, credible developers, and a history of timely delivery. Opting for construction-linked payment plans, where payments are tied to project progress, can reduce risk in case of delays,” says Kapoor.

Additionally, consulting financial advisors or loan experts helps buyers understand repayment implications and choose options aligned with long-term affordability. While No EMI till possession schemes are rare today, similar offers may still exist. Understanding the fine print is crucial before committing.