Interest subsidy limit on home loans to poor to be increased
By Joseph Samson
Jan 23, 2013
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In order to promote housing finance for the underprivileged, the Ministry of Housing and Urban Poverty Alleviation is contemplating to raise the limit of interest subsidy provided to the marginalized as part of interest subsidy scheme to Rs. 5 lakh from the existing Rs. 1 lakh.

The interest subsidy scheme was launched in the year 2008 to provide affordable housing finance to economically weaker sections (EWS) and low income groups (LIG) for buying or constructing houses.

Currently, borrowers availing loans under this scheme are given an interest subsidy of 5 percent for home loans up to the amounts of Rs. 1 lakh from banks as well as housing finance companies.

On the matter, Mr. Lalit Kumar, the General Manager of National Housing Bank said, "The interest subsidy was allowed on the principal amount on an upfront basis. So, that helped to bring down the equated monthly instalments payable by a customer substantially." Though, he added that the offering is not as popular as it was envisaged to be, yet.

He went on to add, "Thus, the Ministry is looking to enhance the interest subsidy on loans up to Rs 5 lakh. However, instead of providing subsidy on an upfront basis, the Ministry may provide subsidy on an annual basis. The subsidy will be staggered over a period of the term of the loan, which is usually 15-20 years."

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