September 26, 2023: The government is planning to spend Rs 60,000 crore to offer home loan subsidy directed to India’s low-income groups living in urban areas, news agency Reuteres reported. The scheme is likely to be announced “in a couple of months” ahead of the General Elections in mid-2024, the report added.
According to the report, banks have already started to identify beneficiaries for the soon-to-be-finalised scheme which could help boost lending in the affordable housing segment within the home loan portfolio.
On August 15 this year, prime minister Narendra Modi said the government was planning to launch a new housing scheme that will help India’s urban poor to build their own homes.
“The weaker sections who live in the cities face a lot of problems. Middle-class families are dreaming of buying their own houses. We are coming up with a new scheme in the coming years that will benefit those families that live in cities, but are living in rented houses or slums or chawls and unauthorised colonies. If they want to build their own houses, we will assist them with a relief in interest rates and loans from banks that will help them save lakhs of rupees,” the PM said in his address.
New home loan subsidy scheme 2024: Features and benefit
Under the new housing loan subsidy scheme, the government may offer an annual interest subsidy of between 3% and 6.5% on home loans of up to Rs 9 lakh. However, the quantum of subsidised credit will depend on demand for such homes. The scheme will cover beneficiaries applying for home loans below Rs 50 lakh for a tenure of 20 years, the report said citing anonymous official sources.
“The interest subvention will be credited upfront to the housing loan account of beneficiaries. The scheme proposed till 2028 is close to finalisation and will require approval of federal Cabinet,” a government official told Reuters. The scheme could benefit 25 lakh loan applicants in low-income groups in urban areas, the official added.
Will the new scheme run alongside PMAY-U?
The government is already supporting home construction in urban areas under its Pradhan Mantri Awas Yojana-Urban (PMAY-U) component. The housing ministry is implementing the scheme since June 25, 2015, to provide pucca house with basic amenities to all eligible urban beneficiaries across the country. The scheme is implemented through four verticals ─ beneficiary-led construction (BLC), affordable housing in partnership (AHP), in-situ slum redevelopment (ISSR) and the credit-linked subsidy scheme (CLSS) ─ based on eligibility criteria as per scheme guidelines.
The PMAY-U is a demand driven scheme. Accordingly, the government has not fixed any target for construction of houses. States have undertaken demand surveys under the PMAY-U for assessing actual demand of housing and reported a demand of 112.24 lakh homes. A total of 118.90 lakh houses have been sanctioned under the PMAY-U till July 10, 2023.
The PMAY-U scheme is valid till December 31, 2024.
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