Loan sanction limit of a year from Oct.
The Union ministry of finance has finalised the interest subvention scheme for low cost housing which had been promised in the Union budget. It will be open for loans up to Rs 10 lakh sanctioned after October 1.
Senior officials told Business Standard the ministry would soon be seeking Cabinet approval for the scheme. “Loans have to be sanctioned between October 1, 2009, and September 30, 2010, though we are also looking at the possibility of keeping the scheme open for only six months till March 31, 2010,” said an official.
The concession interest rate scheme that the Indian Banks Association worked out earlier this year is open for five years. Under the scheme, a one per cent interest subsidy would be available on the first 12 equated monthly installments of the loan; the total cost of the home cannot exceed Rs 20 lakh.
The interest subvention would be routed through scheduled commercial banks and housing finance companies (HFCs) registered with the National Housing Bank. The measure would cost the exchequer Rs 1,000 crore.
An official said they did not expect the entire money to be used up. With an average loan size of Rs 8 lakh in this category, at least 12.5 lakh loans need to be sanctioned during one year for using up Rs 1,000 crore.
The government would compensate banks and HFCs for the subsidy by parking the money with the Reserve Bank of India (RBI) for release on a quarterly or half-yearly basis. The balance sheet of banks and HFCs would be subsequently audited for the amount.
The scheme has been criticised on the grounds that the maximum benefit an individual can get under the scheme was Rs 10,000. “Besides, a builder can always show the housing cost as sub-Rs 20 lakh but increase the price subsequently on various grounds,” said an official.
In his reply to the Budget debate, the finance minister had also allowed developers of housing projects to avail of a tax holiday under section 80 IB(10) of the Income Tax Act on profit from projects approved between April 1, 2007 and March 31, 2008, if the projects are completed on or before March 31, 2012. The minister asked the developers to pass on the benefit to their consumers.
The two announcements were expected to provide a stimulus to the housing sector and were a continuation of the policy that, last December, saw an announcement of a concessional interest rate scheme. The Indian Banks Association had accordingly worked out an interest rate of 8.5 per cent for fresh home loans below Rs 5 lakh and 9.25 per cent for loans between Rs 5 lakh to 20 lakh.
