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6.5% interest subsidy on housing loans for poor


Govt will give outright grant to ease burden on underprivileged

In a bid to make the politically ambitious ‘housing for all by 2022’ project attractive and affordable, the centre has decided to offer a clutch of incentives, including 6.5 per cent interest subsidy on housing loans to encourage economically weaker families and low income individuals to build their own houses.

Accepting recommendations of a high-powered inter-ministerial panel, the government has decided to provide credit-linked subsidy and outright grant to ease the burden on urban poor families willing to build their own houses.

The cabinet committee on economic affairs (CCEA) at a meeting chaired by prime minister Narendra Modi on Wednesday, cleared major changes to the housing for all by 2022 project hitherto put together in February this year.

As per the cabinet panel’s decision to offer 6.5 per cent interest subsidy, equated monthly installments (EMIs) on housing loans up to Rs 6 lakh with a 15-year tenure will be lower by Rs 2,582 per month.

If one were to consider the current housing loan interest rate of 10.5 per cent, the EMI would have worked out to be Rs 6,632 per month. But, with the interest concession provided by government, EMI could now be pegged at Rs 4,050 per month over 15 years.

An official news release said that the total economic benefit to the urban poor setting up their own houses over a 15-year loan period were a whopping Rs 2.30 lakh each.

Hitherto, the interest subvention was pegged at Rs 180,000 (4.98 per cent) for urban poor families on housing loans while LIG category families were eligible for a concession of Rs 120,000 (3.33 per cent).

The government has also doubled the income limit for urban poor and low-income category to two lakhs per annum for being eligible to avail the financial benefits under the housing for all scheme.

Similarly, the income limit for the economically weaker sections has been hiked to Rs 3 lakh and Rs 6 lakh has been set as ceiling for LIG category families.

The CCEA has decided to set the upper limit for housing loans at Rs six lakh per family as against earlier Rs 5 lakh. Similarly, the government has decided to deposit the entire interest on housing loans upfront as against quarterly reimbursements. This, according to an official, will make housing loans under the project ‘more affordable and number of EMIs would also be lesser’.

Economically weaker families, urban poor and LIG category families can now seek housing loans from banks and financial institutions on self-certification of incomes. This is against earlier mandatory income certificate to be provided by state government agencies.

The government has also decided to increase the carpet area for houses meant for economically weaker sections to 30 sq mts as against 21 – 27 sq mts per beneficiary to allow more living space.

Those building their own houses under the new scheme would be eligible for a central assistance of Rs 1.5 lakh as against an earlier Rs 75,000 per family. A PMO news release said that private developers and government agencies would be involved as partners in developing houses for urban poor and economically weaker sections to be implemented in phases.

While states have been given the flexibility on selecting cities and slums for re-development, initially 500 cities and towns with a population of over one lakh would be taken up for development. Targeting these urban cities and towns translate to covering over 75 per cent urban population.

While 100 cities are targeted for coverage in the next two years, another 100 cities would be added during the second phase to be completed by 2019. The remaining 200 cities would be targeted for coverage by 2022.


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