With the aim to promote affordable housing, the government is likely to set up a new fund for housing finance companies (HFCs) under the National Housing Bank (NHB) in the Budget. The fund will allow HFCs to borrow at concessional rates, enabling them to offer home loans at reduced rates to eligible customers. Borrowers having annual income of Rs 6 lakh to Rs 7.5 lakh may be eligible to get such loans from HFCs.
“Representatives from HFCs and the NHB and finance ministry officials recently held a discussion on strategies to boost affordable housing. There was consensus to create a new fund which will be managed by the NHB,” a source told FE. “Currently, the cost of funds for HFCs is around 9%, while the NHB is ready to offer funds at 6.75-7% under the new scheme,” he said, adding that the maximum spread cap proposed for HFCs is 4%.
With cost of borrowing currently at around 9%, HFCs are offering home loans to customers at around 13-14%. Under the new scheme, they will be able to offer loans at around 11-12% as they will be able to borrow from the NHB at around 6.75% or 7%.
During the discussion, HFCs have pitched for increasing the annual income limit of borrowers to Rs 7.5 lakh per annum. The proposal from the ministry was to allow borrowers with Rs 6-lakh annual income eligible under the new scheme. The maximum amount of loan which can be disbursed by HFCs under the new scheme is proposed at Rs 25 lakh.
“The government has made it clear that it wants to promote affordable housing and has announced plans to build houses for people with limited income. HFCs, with the help of the NHB, can help borrowers buy their first home at affordable price,” said a senior official of a housing finance company.
The new government has raised its focus on affordable housing. The new Union Cabinet has approved providing assistance for construction of an additional three crore rural and urban houses under the Pradhan Mantri Awas Yojana (PMAY). Under the PMAY, total 4.21 crore houses have been built for eligible poor families in the last 10 years.