The Cabinet yesterday decided to extend by one year the interest subvention scheme of one per cent on housing loans up to Rs 15 lakh where the cost of the house does not exceed Rs 25 lakh for 2012-13. This will cost exchequer Rs 400 crore.
"When interest rates have risen, even one per cent relief is a relief for the middle class and lower middle class," Home Minister P Chidambaram told reporters here.
The limit of subsidy for an individual borrower would be Rs 14,912 for a loan of Rs 15 lakh and Rs 9,925 for a loan of Rs 10 lakh, he added.
Chidambaram said a large number of people have benefited from the one per cent interest subvention and "whoever borrows now will get the benefit of one per cent".
Housing demand has fallen sharply due to high interest rate regime since last couple of years and almost all the realty firms are witnessing fall in their profits.
At present, interest rates on home loan varies between 10.5 per cent and 13 per cent. The country's largest bank SBI is charging 10.75 per cent interest on loans up to Rs 30 lakhs.
Reacting to the announcement, the apex realtors' body CREDAI President Lalit Jain said: "The one per cent subsidy is too less when the average interest rate on home loan is 12.5 per cent".
Jain demanded that the government should offer the home loan to economically weaker section (EWS) and lower income group (LIG) at 7 per cent. Currently, the country faces a housing shortage of about 25 million dwelling units, bulk of which is from EWS and LIG. MORE
