In order to give a major push to the low-cost housing for low and middle-income groups, the Centre is set to give a relief in the form of 1% interest subsidy on housing loans of up to R15 lakh where the cost of house is up to R25 lakh. As a result, the burden on the government is expected to be to the tune of R500-600 crore.
?The Cabinet will take up the issue on Tuesday,? a senior official said. The decision is expected to benefit borrowers by providing a relief of around R15,000 per annum on loans up to R15 lakh. Till last year, the limit of subsidy for an individual borrower was up to R9,990 on a loan of R10 lakh. In 2011, the Union Cabinet had enhanced the interest subsidy on housing loans from R10 lakh to R15 lakh provided the cost of house was R20 lakh. ?This will be extended to house costing up to R25 lakh now,? the official said.
The move follows a series of recent events which have provided a push to the low and middle-income affordable housing. In April, the Reserve Bank of India (RBI) had allowed the Urban Co-operative Banks to provide housing loans up to R25 lakh under the priority sector lending schemes. Also, RBI had asked all Regional Rural Banks to double the limit for home loans to R10 lakh from R5 lakh for consideration under priority sector lending schemes.
Experts said, once approved, the move will give a boost to the real estate builders operating in the low and middle-income affordable housing category. According to government?s own estimates, the total housing shortage in rural areas will be around 48 million units by 2012-end while the total housing shortage in the urban areas will be around 27 million units.
Earlier in March, former finance minister Pranab Mukherjee in his Budget speech for 2012-13 had proposed to enhance the limit on indirect finance under priority sector lending from R5 lakh to R10 lakh for construction or reconstruction of house for the weaker section. RBI made the announcement in late April. The Budget had also outlined a 1% interest subvention on housing loans of up to R15 lakh where house cost stood at R25 lakh or below. ?And this is what will be taken up by the Cabinet early next-week,? a senior official said.
?Interest subsidy is not the only need for the industry. Budget 2012-13 had also promised External Commercial Borrowing for low-cost houses and service tax exemption on low cost mass housing up to an area of 60 square meter. We are hopeful that more will be done for the low-income and affordable housing categories,? said a real estate consultant.
