20:80 and subvention schemes: who pays the home loan when the builder stops paying

Rules and rates as of 12 October 2026.

The pitch sounds simple: pay 20% of the price now, the bank releases the other 80%, and the builder covers your loan interest until you get the keys. Buyers in Delhi-NCR, and in Mumbai and other cities, signed up to versions of this in projects launched around 2013 to 2015. Many later found that when the builder stopped paying, the bank turned to them. This explainer covers what the paperwork usually means, what the regulators and the Supreme Court have said, and what the bill looks like in rupees.

How a subvention or 20:80 deal is put together

There are usually three parties and three documents: your agreement for sale with the builder, your loan agreement with the bank or housing finance company (HFC), and a tripartite agreement linking all three. The builder's promise to pay your interest (the "subvention") usually sits in the builder's documents or the tripartite agreement. Your promise to repay the loan sits in the loan agreement, and it is in your name.

That split is the root of the problem. The bank lent to you, not to the builder. If the builder's side deal fails, your loan still exists, and so does your obligation under it.

What the RBI said back in 2013

On 3 September 2013 the RBI issued a circular to scheduled commercial banks titled "Housing Sector: Innovative Housing Loan Products – Upfront disbursal of housing loans" (RBI/2013-14/217). It described products "popularly known by various names like 80:20, 75:25 Schemes", where loans were disbursed upfront to builders and the interest or EMI was "serviced by the builders during the construction period".

The RBI listed the risks, including default or delayed payment by the builder on the borrower's behalf, and warned that this "may lead to lower credit rating/scoring of such borrowers by credit information companies". Its direction was that disbursal of individual housing loans "should be closely linked to the stages of construction", and that "upfront disbursal should not be made in cases of incomplete/under-construction/green field housing projects". Banks were also told to ensure borrowers are "made fully aware of the risks and liabilities under such products".

For HFCs, the National Housing Bank issued an advisory on 20 November 2025 (MRO/DOS/DOC/2025/04924) telling all registered HFCs that disbursement must be "strictly linked to the stages of construction" and that upfront disbursal is barred for incomplete, under-construction or greenfield projects. It points HFCs to paragraphs 87 to 89 of the RBI's 2021 Master Direction for HFCs.

What the Supreme Court has found so far

Hundreds of buyers took their cases to the Supreme Court in Himanshu Singh & Ors. v. Union of India & Ors. (SLP (C) No. 7649/2023, with connected matters). The court's order of 29 April 2025 records how these schemes worked: builders advertised them while "assuring payment of the EMI/pre-EMI(s)", typically through tripartite agreements; many builders stopped paying around 2018–2019; and banks then pursued buyers for flats that were not complete. The court described buyers as "now bearing the brunt of such failures".

In that order the court directed the CBI to register seven preliminary enquiries: one into projects of Supertech Ltd., one each for Noida, Greater Noida, the Yamuna Expressway, Gurugram and Ghaziabad, and one for projects outside NCR, where the order lists Mumbai, Bangalore, Kolkata, Mohali and Allahabad. Among the questions for the CBI is whether lenders disbursed money in breach of the RBI and NHB rules against upfront disbursal not tied to construction. These are enquiries, not findings of guilt; the CBI itself told the court that whether a cognisable offence had been committed was not yet clear. The order also records that interim protection for homebuyers is to continue under earlier orders. The court said its directions were issued "as of now", so later orders may have changed things.

Worked example: the builder stops paying after 24 months

Take a ₹1 crore flat. You pay ₹20 lakh. The lender releases ₹80 lakh to the builder upfront, the kind of release the 2013 circular bars for under-construction projects. Your loan rate is an illustrative 8.75% a year, floating. The builder pays the pre-EMI (interest only, no principal) for 24 months, then stops. Possession is now 18 months away.

Pre-EMI = disbursed amount × annual rate ÷ 12
= ₹80,00,000 × 8.75% ÷ 12 = ₹58,333 a month

Over the remaining 18 months: ₹58,333 × 18 = ₹10.5 lakh in interest, none of which reduces the ₹80 lakh you owe. If the project slips and the wait becomes 36 months, the figure doubles to ₹21 lakh. When the full EMI starts, a 20-year loan of ₹80 lakh at 8.75% works out to EMI = P·r·(1+r)ⁿ / ((1+r)ⁿ − 1), with r = 8.75%/12 and n = 240, which is about ₹70,697 a month.

Compare a loan disbursed in construction stages, where perhaps half (₹40 lakh) had been released by month 24. The pre-EMI on that is ₹29,167 a month. Upfront release doubles the interest risk.

Illustrative rate	Pre-EMI on ₹80 lakh (upfront)	Pre-EMI on ₹40 lakh (stage-linked)	18 months on ₹80 lakh	36 months on ₹80 lakh
8.25%	₹55,000	₹27,500	₹9.9 lakh	₹19.8 lakh
8.75%	₹58,333	₹29,167	₹10.5 lakh	₹21 lakh
9.25%	₹61,667	₹30,833	₹11.1 lakh	₹22.2 lakh

The rates are illustrative, not quotes. With the repo rate at 5.50% since 7 October 2026 and the RBI's stance described as "calibrated tightening", a floating loan linked to an external benchmark can be reset at least once every three months, so the pre-EMI can move in the middle of a dispute.

So who is on the hook?

Under the loan agreement, usually you. The builder's promise to pay your interest is a promise to you, so if it is broken your claim lies against the builder. It does not normally cancel your debt to the bank. Missed payments can show up on your credit report, a risk the RBI flagged in 2013.

What you do have:

• Your own documents. The tripartite agreement may say what happens if the builder defaults, and whether the lender must follow stage-linked disbursal. Check the disbursement dates in your loan statement against the construction stage at the time.
• RERA. Section 18(1) of the Real Estate (Regulation and Development) Act, 2016 makes a promoter who fails to give possession liable to refund the amount received with interest if you withdraw. If you stay, you are owed "interest for every month of delay, till the handing over of the possession". Section 31 lets any aggrieved person complain to the state authority, such as UP RERA, Haryana RERA or MahaRERA. RERA also binds you: under Section 19(6) and 19(7) you must pay as the agreement for sale says, or pay interest on delays.
• The lender's grievance route and the RBI Ombudsman, if you think the disbursal broke the stage-linking rule.
• The Supreme Court case, if you are already a party or your project is covered. A lawyer can tell you whether interim protection applies to you.

None of these routes is quick. Meanwhile the interest keeps building up. Whether to keep paying the pre-EMI under protest while pursuing the builder separately depends on your documents, so take it to a lawyer who handles RERA and banking disputes.