The government today announced a scheme that will provide interest subsidy of 5 per cent for home loans up to Rs 1 lakh taken by the urban poor. This would mean that urban poor will only pay 3.5 per cent interest on such loans.
The Cabinet Committee of Economic Affairs today gave its approval to provide mortgage loans belonging to economically weaker segment (EWS) and low income category (LIG).
The subsidy would cost Rs 1,100 crore to the government and is expected to bring institutional finance to this neglected segment of Rs 3,870 crore in the period upto March 2012, a press statement said.
It will make the housing dreams of economically weaker sections of urban areas come true as the subsidy is fixed keeping in mind the repayment capacity of the section of society, Home Minister P Chidambaram told reporters here.
"The interest subsidy scheme is expected to supplement the efforts of the government started through the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) to comprehensively address the housing shortage,” Chidambaram said.
Around 1.5 million houses are being built for EWS at an expected cost of Rs 40,000 crore, with centre sharing 50 per cent of the project cost.
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Recently, state-owned banks announced lower interest rate for housing loans taken in two categories. For loans up to Rs 5 lakh, these banks would charge a maximum of 8.5 per cent. And an interest rate of 9.25 per cent for loan amount between Rs 5 lakh and Rs 20 lakh.
The loan repayment period for the urban poor would vary between 15-20 years. The scheme will result in creation of additional housing stock of 3.10 lakh houses for EWS and low income group (LIG) households over the next four years. Of the total, 2.13 lakh dwelling units will be for the EWS and 0.97 lakh for LIG housing, he said.
The National Housing Bank and Housing & Urban Development Corporation (HUDCO) will be the nodal agencies for disbursement of the subsidy and monitoring the progress. Housing Finance Institutions like banks, Housing Finance Companies, Micro Finance Institutions, etc. will have the option to avail the resources of either of the nodal agencies for the period of the scheme.