Stocks of housing finance companies gained momentum on Thursday after the Cabinet approved the enhancement of the carpet area of houses eligible for interest subsidy under the credit-linked subsidy scheme (CLSS) for the middle income group (MIG) under Pradhan Mantri Awas Yojana (Urban) scheme. Reacting to the announcement, the shares of Can Fin Homes surged over 5% to end the session at Rs 449.20, up 2.7%, while Dewan Housing Finance (DHFL) gained 3.1% during the day. GIC Housing Finance and LIC Housing Finance gained 1.7% each in intra-day trade. The country’s largest mortgage lender HDFC gained close to 1% to close the session at Rs 1,663.95 on the BSE. Under the PMAY-U scheme, the interest subsidy will be provided on loans for construction/acquisition of house with carpet area of up to 120 square metres, against the earlier threshold of 90 square metres. For MIG-II category, the area has been increased up to 150 square metre from the current 110. The changes will be effective from January 2017. Shares of housing finance companies were under pressure due to the prevailing sluggishness in the realty sector.
While GIC Housing Finance and Can Fin Homes came off 32% and 33% since the middle of June 2017, LIC Housing Finance declined 26% during the same time period. The increase in carpet area will give individual in MIG II category a wider choice in developers’ projects. Under the scheme, middle income groups with annual income of above rupees six lakh and up to Rs 18 lakh per annum are eligible for interest subsidy on housing loans. The prime minister had announced interest subsidy of 4% on housing loans of up to rupees nine lakh of those with an income of Rs 12 lakh a year and of 3% on housing loans of up to Rs 12 lakh of those earning Rs 18 lakh per annum.