The Cabinet Committee on Economic Affairs on Wednesday approved a proposal to increase the interest subvention rates for affordable housing through credit-linked subsidy component of the ‘Housing For All’ by 2020 mission.
The committee, chaired by Prime Minister Narendra Modi, accepted recommendations of an inter-ministerial committee to increase the interest subsidy to 6.5 percent for loans of up to Rs 6 lakh for Economically Weaker Section (EWS) and Lower Income Group (LIG) beneficiaries under the mission. Of the total interest rate of 10.50 per cent, beneficiaries will now have to bear only the remaining 4 per cent.
“While the mission was broadly approved by the Union Cabinet on February 19 this year, the group of ministers was formed to study the feasibility of raising the interest subsidy levels from the existing 5 per cent,” said an official from the Ministry of Housing and Urban Poverty Alleviation.
The proposal placed before the Union cabinet in February had, in fact, suggested that the existing interest subsidy be lowered further to 4.98 per cent for EWS and 3.33 per cent for LIG category on net present value basis. It was, however, turned down by cabinet members who were in favour of a hike in subsidy, said officials.
The inter-ministerial committee has asked for the interest subsidy of 6.5 per cent to be kept constant even in the event of a future increase in interest rates.
The hike in interest subsidy amounts to a central assistance of Rs 2.30 lakh per beneficiary through the credit-linked subsidy scheme of the mission.
The other three components of the mission, namely slum redevelopment through private developer participation, affordable housing in partnership with private and public sector and subsidy for individual-led construction or enhancement, will get central grants in the range of Rs 1 lakh to Rs 1.5 lakh for each of the beneficiaries from the EWS and LIG category.