The central government has set up pay commission every 10 years, at least since 1986, to recommend changes to salaries, allowances and other perks for the employees and pensioners. The last pay panel, 7th Pay Commission, was set up 10 years back and its term will end on December 31, 2025. Among the several other measures recommended under the 7th Pay Commission, one was related to an increase in the house building advance (HBA) for central government employees.
As per the rule, a central government employee can take HBA to purchase or build a house. The maximum loan amount should be 34 months of basic pay, up to a maximum of Rs 25 lakh. The interest rate for FY 2024-25 is 7.44%.
But looking at the current real estate market, this amount is now starting to seem nominal for many employees. In such a situation, the expectations of increasing this limit from the 8th Pay Commission have increased significantly.
The Centre has already announced the 8th Pay Commission and the Terms of Reference (ToR) – which will mainly focus on salary and pension hikes along with allowances – is expected to be known to all the stakeholders soon.
As regards the HBA of Rs 25 lakh, it was raised to Rs 25 lakh in the 7th Pay Commission but the question arises, if this amount is enough now for employees to buy homes or construct.
It has been more than 9 years now since the 7th Pay Commission was implemented in January 2016. During this period, inflation in the country has increased at an average rate of 5 to 6 percent per year. As a result, buying or building a house today has become more expensive than ever – whether it is a metropolitan or tier-2 city.
8th Pay Commission: There should be an increase in facilities, not just salary
Preparations have started in government circles for the 8th Pay Commission. It is expected that this commission can be implemented from mid 2026. However, the 8th Central Pay Commission is originally scheduled to be implemented from January 2026. Once implemented, over 1.2 crore central government employees and pensioners will be benefitted.
So far the discussion has been limited to salary and fitment factor, but the Pay Commission is not just a means of increasing the salary. It is also a big opportunity to review the facilities and allowances given to the employees during their tenure.
House prices skyrocket: Is Rs 25 lakh enough?
Today, if an employee wants to buy a house in a metropolis like Mumbai, Delhi or Bengaluru, then even Rs 1 crore starts to seem like a small budget. Even in tier-2 cities like Jaipur, Lucknow, Bhopal, Patna, it is difficult to buy a decent house for less than Rs 50 lakh. In such a situation, the question arises – when the prices of the house have doubled or tripled, then why is the advance limit the same?
The HBA limit was Rs 7.5 lakh under the 6th Pay Commission in 2008. In the 7th Pay Commission, it was raised to Rs 25 lakh — a 233% increase. Now that inflation has once again made living and buying a home challenging, it is hoped that the 8th Pay Commission may raise it to at least Rs 40-50 lakh.
Rs 50,000 to buy a PC? Even that is not enough in today’s times
The 7th Pay Commission retained another facility — Personal Computer Advance (PC Advance). Employees can avail an advance of up to Rs 50,000 up to five times, the interest rate is 9.1%.
But in today’s times when a good laptop or desktop costs between Rs 70,000 and Rs 1 lakh, even the Rs 50,000 limit calls for an update.