In a move that could boost the affordable housing segment and also loan offtake of housing finance companies, the government has approved a substantial hike in interest relief on loan for urban poor to promote affordable homes.
The Union Cabinet adopted the recommendations of a committee to increase interest subvention to 6.50% on housing loans to beneficiaries belonging to economic weaker sections. This subsidy hike is part of the government’s ‘Housing for All by 2022’ scheme. The Cabinet’s decision could provide a benefit of Rs 2.30 lakh to each home buyer and bring down the equated monthly instalments to Rs 2,852. At present, at an interest rate of 10.50% on a 15-year loan of Rs 6 lakh, the EMI works out to Rs 6,632 which would come down to Rs 4,050 after increase in interest subsidy to 6.5%, a senior official at the department of housing and urban poverty alleviation said.