Costs & benefits of interest subvention scheme in residential real estate

Abstract

This capstone project investigates the economic viability and strategic implications of implementing interest subvention schemes in India’s residential real estate sector. With rising interest rates and competitive housing markets, developers increasingly offer subvention schemes—where they pay the interest on home loans until possession—to incentivize buyers and boost sales. The study adopts a multidisciplinary approach, combining insights from finance, economics, policy, and data analysis. It evaluates both costs and benefits for developers and customers, considering factors such as affordability, market dynamics, regulatory gaps, and consumer behavior. Through literature review, consumer surveys, and scenario-based financial modeling, the report identifies key determinants of scheme success, including project size, location desirability, builder wealth, and customer price sensitivity. Findings suggest that while subvention schemes can enhance sales and affordability, they may also erode developer profitability if not strategically applied. The report concludes with recommendations for optimal implementation, emphasizing the need for regulatory clarity, financial literacy, and targeted marketing to maximize impact in the affordable housing segment.