Central government employees: The Government had earlier revised the House Building Advance rules for the Government Employees incorporating the accepted recommendations of the 7th Pay Commission.
House Building Advance Interest Rate: Finance Minister Nirmala Sitharaman, while announcing relief measures for the economy on Saturday, also talked about a relief measure that directly impacts the Central government employees in the country. The FM has announced lowering of the interest rate for House Building Advance (HBA) which in turn will benefit the government employees who wish to construct their own house. The Government had earlier revised the House Building Advance (HBA) rules for Central Government Employees incorporating the accepted recommendations of the 7th Pay Commission.
Going forward, the interest rate of House Building Advance (HBA) will be linked to the 10-year G-Sec yield on the amount of advance taken for building home. Currently, the rate of interest on Housing Building Advance is at 8.50 per cent of simple interest. As on September 14, 2019, the 10-year G-Sec yield is 6.64 per cent. This means the interest rate under HBA falls from 8.5 pr cent to nearly 6.64 per cent for the Central government employees. The actual modalities to arrive at the effective rate of interest remains to be seen.
Some of the important features of the House Building Advance (HBA) are:
1. The total amount of advance that a Central government employee can borrow is up to 34 months of the basic pay subject to a maximum of Rs. 25 lakh, or cost of the house, or the amount according to repaying capacity, whichever is the least for new construction/purchase of new house/flat.
2. The HBA amount for expansion of the house is capped at Rs.10 lakh or 34 months of basic pay or cost of the expansion of the house or amount according to repaying capacity, whichever is least.
3. The methodology of recovery of HBA shall continue as per the existing pattern recovery of principal first in the first fifteen years in 180 monthly instalments and interest thereafter in next five years in 60 monthly instalments.
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4. The cost ceiling limit of the house which an employee can construct/ purchase is Rs.1.00 crore with a proviso of upward revision of 25% in deserving cases. There is a provision for individuals migrating from home loans taken from Financial Institutions/ Banks to HBA, if they so desire.
5. Both spouses, if they are central government employees are eligible to take HBA either jointly, or separately.