For hilly and other difficult areas, the grants for constructing houses under the Indira Awaas Yojna (IAY) has been increased from Rs 48,500 crore to Rs 75,000.
There will also be a provision now of loan up to Rs 20,000 - up from Rs 10,000 - with four per cent interest for buying land for the house.
Union Cabinet today approved the proposal of the Ministry of Rural Development to provide a quality and affordable house and increase the unit cost taking into account numerous requests from the stakeholders keeping in view the steep increase in cost of materials, Finance Minister P Chidambaram told a press conference here.
Rural Development Ministry's proposal was to hike in allocation of grants for construction of houses for BPL families under the IAY from Rs 45,000 to Rs 75,000 per dwelling unit, but Finance Ministry reportedly fixed the amount at Rs 65,000.
The Ministry had also suggested that grants for constructing houses under the scheme should be increased from Rs 48,500 crore to Rs 80,000 for hilly and difficult areas.
"Cabinet has taken a middle path on the issue. There were differences in the proposals and amount suggested by our ministry and the Finance Ministry," Rural Development Minister Jairam Ramesh told reporters.
"This is a via media, Finance Ministry had wanted Rs 45,000 to Rs 65,000. We had wanted Rs 45,000 to Rs 75,000. So Cabinet has taken a middle path. Finance Ministry had not agreed to doubling the amount to be given to the landless for buying land but Cabinet has agreed to that," he said.