Business Standard

Interest subsidy scheme for low-cost homes

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BS Reporter New Delhi

Prospective buyers of houses costing up to Rs 20 lakh will now get an interest subsidy of 1 per cent from the government. The Centre today launched the interest subvention scheme for all individual housing loans up to Rs 10 lakh. The scheme will remain in operation for a year from October 1, 2009, to September 30, 2010.

“The scheme recognises that the cut in interest rates has an important role to play in reducing EMIs (equated monthly instalments) of borrowers and creating additional demand for housing. It 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 finance ministry said in a statement.

 

A subsidy of 1 per cent would result in a reduction of 100 basis points in the interest rate for a borrower. For instance, if a bank is giving a loan of Rs 10 lakh at 8 per cent, the customer would get it at just 7 per cent. Therefore, on a 20-year loan of Rs 10 lakh, a borrower can save Rs 600 per month.

The scheme, designed to help the low and middle income groups buy a house, will cover all regions of the country.

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First Published: Oct 01 2009 | 12:57 AM IST

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