The interest subvention will be credited upfront to the housing loan account of beneficiaries. If you’ve been dreaming of becoming a homeowner in India, this could be your golden opportunity. The Indian Government, in an attempt to uplift the real estate sector and support potential homeowners, is contemplating an investment of Rs 600 billion ($7.2 billion) in a subsidized home loan initiative specifically designed for small urban housing. This major move is anticipated to span over the next half-decade, as confirmed by two credible government sources to Reuters.
The banking sector is projected to initiate this promising scheme within the next few months. It’s speculated to be rolled out ahead of the imminent key state elections to occur later this year and proceeding to general elections in mid-2024. Earlier, the government had announced a cut in household cooking gas prices by approximately 18% just last month, a strategic move to curb inflation prior to the elections.
Details of the Scheme for loan
This scheme, although announced by Prime Minister Narendra Modi during his speech on Independence Day last August, hadn’t been discussed in great length until now. Let’s look into the details, shall we?
- Interest Subsidy: Beneficiaries can expect an annual interest subsidy ranging between 3% – 6.5% on up to Rs 0.9 million (Rs 9 lakh) of the loan amount.
- Eligibility: The loans eligible for the subsidy would be capped at Rs 50 lakh, intended for a duration of 20 years.
The scheme proposed till 2028 is close to finalization and will require approval of the federal cabinet – a Government Official (Reuters Report)
It’s estimated that this scheme could aid 25 Lakh applicants from low-income groups residing in urban areas. However, the amount of subsidized credit provided will be dictated by the demand for such categories of homes.
In his speech, PM Modi reiterated his ambition to support families that live within cities yet are housed in rented properties, slums, or unauthorized colonies. Unfortunately, the officials who leaked these scheme details chose to remain anonymous as the scheme is still in its final stages of approval.
Existing lenders have not yet received any specific directives in terms of loan allocation, but meetings with government officials are likely to follow soon. In the meantime, banks have commenced the process of identifying potential beneficiaries. Effectively, the scheme could be the catalyst for boosting lending within the affordable housing segment of the home loan portfolio.
This is not an unprecedented move from the Indian Government. A similar initiative ran between 2017-2022, under which 12.27 million homes were sanctioned. The success of that past scheme elevates hopes for this new investment.
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