Supreme Court gives big relief to homebuyers stuck in 20:80 EMI subvention scheme; check case history

The Supreme Court has provided a reason for cheer to several homebuyers, who suffered for years after opting for a 20:80 home loan EMI subvention scheme offered by a developer in Mumbai.

Through multiple orders and the final judgement dated March 25, 2025, the apex court has helped settle the dispute among the involved parties - borrower/flat owners, the builder, and the Bank.

"Today Hon’ble Supreme Court passed a landmark order giving big relief to my clients who had taken a huge loan to buy an apartment in Mumbai. Such orders restore common citizens’ faith in SC," Advocate Alakh Alok Srivastava, who was one of the lawyers representing the homebuyers, posted on X.

Case history

The sale agreement between the homebuyers and the builder/developer was signed in August 2013. Clause 9 of the sale agreement mentioned that the interest would be borne by the builder till the handover of possession.

After paying pre-EMI till April 2019, the builder informed the buyers that they won’t be able to pay due to “poor financial condition.”

Later in July 2019, the bank told buyers that their EMIs were due for more than 60 days. Later in September, the bank issued loan recall notices.

No relief from NCDRC

The homebuyers found no relief from the consumer forum. In January 2023, the National Consumer Dispute Redressal Commission (NCDRC) dismissed the homebuyers’ complaints against the builders and developers and the bank. Reason?

The NCDRC said the sale agreement didn’t fully absolve the liability of the homebuyers to pay the EMI till possession.

According to a report on Moneylife.in, the national consumer panel noted that the sale agreement between home buyers and the builders mentioned that they had agreed with the bank "to promote subvention scheme popularly known as 20:80.” This only meant that the bank was ready to give a loan to the extent of 80% of the cost of the flat under the subvention scheme. However, it didn't mean that the liability of the complainants to repay the loan or EMI was absolved till delivery of possession.

The NCDRC further held that there was no such contract between the bank and the complainants. It also said that the loan was under the "developer subvention scheme" and not under any scheme of the bank.

"Under the facility agreement (standard format of the loan agreement) and undertaking, the complainants are bound to pay EMI if the builders stop payment," the NCDRC said.

What the apex court said

The Supreme Court has, however, overturned the NCDRC order and ensured justice for the homebuyers. According to the judgment dated March 25:

• The builder has paid the outstanding amount of pre-EMI

• The builder has also paid 50% of the pre-EMI outstanding amount that the borrower had paid directly to the Bank.

• Borrowers/homebuyers have paid the outstanding amount due to them

• The bank provided discounts for full settlement

• The builder has agreed to hand over possession on or before March 31, 2025.

• The Bank has also issued certificate stating that nothing further remains outstanding.

• The court has directed the bank to replace the word ‘settlement’ used in the loan account statement with repaid or fully paid up.

• Builder will provide acknowledgement of having received the full amount in writing

• The bank will withdraw the case from the Debt Recovery Tribunal against the homebuyers, and the latter will withdraw any case against the builder from the Real Estate Regulatory Authority.

"This is a classic case where wisdom dawned upon the three parties in a commercial arrangement to settle the dispute amicably, of course, with a little effort by the Court,” the apex court noted.

While the homebuyers have finally got what they wanted, the case history highlights why it is important to carefully review sale agreements and loan documents before signing. Moreover, buyers should steer clear of complex schemes like EMI subvention unless absolutely necessary.