Scheme of 1% interest subvention on housing loans upto Rs.10 lacs

Anjali


The Government today launched an interest
subvention scheme of
1% on all individual
housing loans upto Rs.10 lakh for units costing
upto Rs. 20 lakh.

The scheme recognizes that cut in interest
rates has an important role to play in reducing
EMIs of borrowers & creating additional demand
for housing. The Scheme will cover all regions
of the country and support the low and middle
income sections of society to become house owners.

The scheme is also expected to give a boost
to credit flow to the housing sector and
create additional employment in the housing
and allied sectors, such as steel and cement.


The scheme was formulated in response to an
announcement made by the Finance Minister in
the Lok Sabha on 27th July, 2009 where he stated
that housing, particularly lower and middle income
housing, deserved to be supported.

In order to stimulate the demand for
housing for this segment of the population
he proposed an amount of Rs. 1000 crore to
be allocated as interest subsidy for a
period of one year of operation of the scheme.


The allocation of the amount and the guidelines
of the scheme were approved by the Cabinet on 10th September 2009.


The scheme will be in operation for a period
of one year starting from 1st October 2009
to 30th September 2010. Subsidy of 1 per cent
will be defined as reduction in interest rate by
100 basis points per annum from the existing
rate of interest for a particular amount & tenor.
It will be applicable to the first twelve instalments
of all such loans sanctioned and disbursed during
the currency of the scheme and will be computed for
12 months on the disbursed amount. The subsidy
amount will be adjusted upfront in the principal
outstanding, irrespective of whether the loan
is on fixed or floating rate basis.

The Scheme will be implemented through scheduled
commercial banks (SCBs) and housing finance
companies (HFCs) registered with the National
Housing Bank. The RBI and the NHB will be
the Nodal Agencies for this Scheme for SCBs
and HFCs, respectively. The number of beneficiaries
covered under the scheme will depend, interalia,
upon the size of the loan amount and the number
of beneficiaries approaching the nodal agency
for interest subvention. Being a demand driven
scheme no specific targets for coverage of
beneficiaries have been fixed. An amount of
Rs. 300 crore will be allocated in the Budget
of 2009-10 for implementation of the Scheme.

The balance amount will be allocated in
the Budget of next year.