Banks have requested the finance ministry to raise the cap on benefits available on housing loans for affordable home buyers in urban areas, so as to make the incentive more meaningful, given the high realty prices in big cities. At present, interest subsidy under the government’s Credit Linked Subsidy Scheme (CLSS) is restricted to an amount of up to Rs 12 lakh. According to sources FE spoke to, the representation was made at a meeting held in New Delhi on December 15 and attended, among others, by finance minister Arun Jaitley, finance secretary Hasmukh Adhia, State Bank of India (SBI) chairman Rajnish Kumar, HDFC Bank managing director (MD) Aditya Puri, ICICI Bank MD and CEO Chanda Kochhar, Axis Bank MD and CEO Shikha Sharma and Kotak Mahindra Bank vice-chairman and MD Uday Kotak. “One of the asks that came was that in the urban areas, the ministry can consider relooking at the Rs 12-lakh cap because in a metro even an affordable house costs more than Rs 12 lakh,” one of the sources said, adding that there was no discussion on what the new limit should be, in case of a revision.
The CLSS was introduced in June 2015 by the ministry of housing & urban poverty alleviation, to enable people from the economically weaker section (EWS) and low income group (LIG) to own houses. The ambit of the CLSS has been expanded with two modifications this year. On December 31, 2016, two new income segments were covered under it. These were households classified as middle income group (MIG)-I, whose annual incomes range between Rs 6 lakh and Rs 12 lakh, and MIG-II, with incomes between Rs 12 lakh and Rs 18 lakh per annum. MIG-I is eligible for an interest subsidy of 4% for loan amounts up to Rs 9 lakh, while MIG-II households will get an interest subsidy of 3% has for loan amounts of up to Rs 12 lakh. In November, the carpet area ceilings for MIG households were raised, making more people eligible under CLSS. For MIG-I, it was raised from 1,000 square feet to 1,300 square feet, while for MIG-II it was increased from 1,200 square feet to 1,600 square feet. At the meeting, a proposal was also shared to raise the limit for tax deducted at source (TDS) on interest income from fixed deposits. At present, TDS applies to interest income of over Rs 10,000.