Finance Ministry's support for low cost housing finalized
Bangalore: In its attempt to boost the housing sector, the Finance Ministry has finalized the interest subvention scheme for low cost housing. The scheme which was promised by the ministry in the Union Budget will be applicable for loans up to 
10 lakh, sanctioned after October 1.
According to Business Standard, the ministry would soon be seeking Cabinet approval for the scheme. An official said, "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."
The Indian Banks Association had worked out the concession interest rate scheme earlier this year to be open for five years. Under this scheme, a one percent interest subsidy would be available on the first 12 equated monthly installments of the loan, where the total cost of the house does not exceed 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 is expected to cost the exchequer around 1,000 crore.
An official said they did not expect the entire money to be spent. With an average loan size of 8 lakh in this category, at least 12.5 lakh loans need to be sanctioned during a year for spending 1,000 crore. The government would compensate banks and HFCs for the subsidy by depositing 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.
10 lakh, sanctioned after October 1.
According to Business Standard, the ministry would soon be seeking Cabinet approval for the scheme. An official said, "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."
The Indian Banks Association had worked out the concession interest rate scheme earlier this year to be open for five years. Under this scheme, a one percent interest subsidy would be available on the first 12 equated monthly installments of the loan, where the total cost of the house does not exceed 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 is expected to cost the exchequer around 1,000 crore.
An official said they did not expect the entire money to be spent. With an average loan size of 8 lakh in this category, at least 12.5 lakh loans need to be sanctioned during a year for spending 1,000 crore. The government would compensate banks and HFCs for the subsidy by depositing 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.