Govt extends 1% interest subsidy on home loans of up to Rs 15 lakh

The government on Tuesday raised the housing loan ceiling for availing 1 % interest subsidy to Rs 15 lac from existing Rs 10 lac, a decision that will benefit borrowers by up to Rs 14,865 per annum.

A meeting of the Union Cabinet approved the proposal to give one % interest subsidy for home loans of up to Rs 15 lac provided the actual cost of the house is not exceeding Rs 25 lac.

Under a scheme introduced in 2009, home loan borrowers are getting one % interest subsidy on home loans of up to Rs 10 lac, provided the cost of the house did not exceed Rs 20 lac.

“A budgetary provision of Rs 500 crore has been made for the financial year 2011-12 for implementing the scheme,” the Minister of State for Information and Broadcasting Ambika Soni reporters after the Cabinet meeting.

With the increase in housing loan ceiling, the limit of subsidy for an individual borrower would go up to Rs 14,865 per year for a loan of Rs 15 lac on reducing balance basis from the present limit of Rs 9,910 for a loan of Rs 10 lac, Soni said.

The government has designated the National Housing Bank as the nodal agency for implementing the scheme both for scheduled commercial banks and housing finance companies, the minister said.

Finance Minister Pranab Mukherjee in his Budget Speech this year had announced liberalisation of the existing scheme of one % interest subvention on housing loans.

The existing scheme of one % interest subvention of housing loan up to Rs 10 lac provided the cost of the housing unit does not exceed Rs 20 lac was approved by the Cabinet in September 2009, she said.

The scheme provides interest subsidy on housing loans as a measure to generate additional demand for credit and to improve affordability of housing in the lower and middle income groups, Soni said.

Earelir the Reserve Bank and NHB were designated as nodal agencies for implementing the scheme for scheduled commercial banks and housing finance companies, respectively.

 

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