1. Budget 2017: Interest subsidy, re-categorisation for affordable housing on the anvil

Budget 2017: Interest subsidy, re-categorisation for affordable housing on the anvil

The government may incentivise low-cost housing in the country with re-categorisation of such houses and interest subsidy on loans in an effort to ease the pain of demonetisation. It may provide 3% interest subsidy on home loans up to Rs 12 lakh under this category.

By: | Published: January 25, 2017 4:43 PM
The government may redefine affordable housing in the upcoming Budget 2017 to cover 2-BHK houses as well. The government may redefine affordable housing in the upcoming Budget 2017 to cover 2-BHK houses as well.

In an effort to ease the pain of demonetisation, the government is learnt to be planning to incentivise low-cost housing in the country with re-categorisation of such houses and interest subsidy on loans, ET Now reported, sending housing finance companies shares soaring.

The government may redefine affordable housing in the upcoming Budget 2017 to cover 2-BHK houses as well, ET Now reported on Wednesday citing unidentified sources.

Housing Development Finance Corp – India’s largest housing financier – surged and were trading at Rs 1,337.4, up 4.42%.

Earlier this month, various media reports had said that the government may include low-cost housing in infrastructure sector with a change in definition. Currently, affordable housing does not have a formal definition by the government but is generally considered to be what is within the affordability of those whose income is below the median household income.

ET Now said that the government is mulling 3% interest subvention for loans taken for affordable housing. The subvention will be applicable on the loan amount of up to Rs 12 lakh, while the actual loan taken may be higher.

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Prime Minister Narendra Modi launched the Pradhan Mantri Awas Yojana in 2015, with an aim to help provide housing for all by the year 2022 by building 2 crore houses. The scheme provides for an upfront subsidy for low-cost housing and an interest rate subsidy of 6.5% for loans up to Rs 6 lakh taken for the purpose.

In his address to the nation on the new year’s eve, Modi has already extended the scheme to cover loans up to Rs 9 lakh and up to Rs 12 lakh, with interest subsidy of 4% and 3% respectively for home loans taken under this scheme.

With the new plan for the Budget, the interest subsidy will be available to other affordable housing buyers as well, who are not eligible for the Pradhan Mantri Awas Yojana.

The government appears to be taking a lot of measures providing incentives to spur the economy in order to counter the impact of demonetisation.

Earlier this week, the Union Cabinet approved a new interest subsidy scheme for promotion of rural housing to provide subsidy to the rural households not already covered under the Pradhan Mantri Aawas Yojana (Grameen), (PMAY[G]). The scheme will be available for people in rural areas who construct new houses or add to their existing pucca houses to improve their dwelling units. The government will give 3% subsidy on loans up to Rs 2 lakh. The scheme would be implemented by the National Housing Bank.

 

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