25 JUNE, 2021

A home loan can help you finance the purchase of your dream house. You can easily repay the loan amount in the form of home loan EMIs or Equated Monthly Instalments spread over the loan tenure of 20 years. While researching on real estate and good deals, it is likely that will come across the term ‘No EMI till possession’. So, what exactly is ‘No EMI till possession’ and how can it benefit you

What Is ‘No EMI till Possession’?

  1. ‘No EMI till Possession’ is essentially an agreement between the customer, bank, and the builder
  2. In such an agreement, the builder is actually paying the interest on the home loan amount taken by the customer, until the customer gets possession of the property.
  3. Therefore, as long as the property is under construction, the customer can enjoy interest-free home loan
  4. ‘No EMI till possession’ also helps in ensuring that the property’s construction is completed in a scheduled manner. This is because the more the delay in completion of property’s construction, the higher will the interest paid by the builder.
  5. Another benefit to the lender is that customers are often willing to bear higher processing fees and interest rates as they won’t have to pay EMIs till the possession of the property.

If you are looking forward to availing a home loan for purchasing an under-construction property, you can consider making use of the ‘No EMI till Possession’ scheme. However, make sure that you check the scheme for loopholes before giving it a go-ahead.

Things to Consider Before Opting for ‘No EMI till possession’

Checkout some important aspects to consider before going ahead with this scheme:

  1. Carefully read the terms and conditions of the agreement that you sign with the property-builder. Let everything be on paper, and part of the three-party agreement that you sign.
  2. Builders may propose a fixed lock-in period in case of such properties. You won’t be able to sell the property during the lock-in period. You will have to pay a heavy penalty if you do so. Read and understand the lock-in period clause carefully.
  3. In most cases, ‘No EMI till possession’ scheme is only valid for a fixed period of 2 to 3 years, and the builder is expected to give possession during this period. If the possession of the property is delayed, the responsibility to pay the bank falls on the buyer.

It is essential that you make a note of the period for which the builder agrees to pay the EMI and the consequences if the builder defaults on payments. Lastly, before investing in an under-construction property, make sure that the property suits all your requirements such as location, amenities etc. This will make it easier for you to avoid any inconveniences later.

Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.