Mukherjee announces more sops as Lok Sabha passes Finance Bill
BS Reporters / New Delhi/Mumbai Jul 28, 2009, 00:16 IST
Finance Minister Pranab Mukherjee today announced an interest subsidy of 1 per cent for one year on housing loans of up to Rs 10 lakh for properties worth less than Rs 20 lakh, a move that has been widely welcomed by realtors and home loan companies. The measure is expected to cost the exchequer Rs 1,000 crore.
Mukherjee also allowed developers of housing projects a tax holiday under section 80 IB(10) of the Income Tax Act on profits from projects approved between April 1, 2007 and March 31, 2008, provided the projects are completed on or before March 31, 2012. Mukherjee asked developers to pass on the benefits of this tax break to consumers.
Mukherjee made these announcements in the Lok Sabha today as part of his reply to the discussion on the Finance Bill. Both houses of Parliament passed the Finance Bill 2009-10, which included a raft other concessions.
Assuming a monthly saving of Rs 60 per lakh, today’s announcement implies that a borrower saves about Rs 7,200 on a 15-year loan of Rs 10 lakh. The interest rate subvention will be routed through the scheduled commercial banks and the housing finance companies registered with the National Housing Bank.
PRANAB'S PANACEAS
(Other announcements in Parliament on Monday)
* Extension of tax breaks for industrial park schemes by two years till the end of March 2011
* Poultry, real estate developers and food processing units to get tax breaks
* Tax sops on natural gas produced from coal seams
* Service tax on new services applicable from September 1, 2009
* Road repair and maintenance services exempt from service tax
* Legal guardian of the student who has applied for an education to get tax break
“The demand for affordable housing is picking up and the interest subvention of 1 per cent on home loans will make it easier for people to buy homes,” said Pradeep Jain, chairman, Parsvnath Developers.
Today’s announcements mark the second stimulus package for the slowing real estate sector, which has been hit by slowing demand and rising costs. Last December, the government had announced a concessional interest rate scheme for housing loans as part of the first fiscal stimulus package. The Indian Banks Association (IBA) had accordingly worked out an interest rate of 8.5 per cent for fresh home loans below Rs 5 lakh and 9.25 per cent for loans between Rs 5 lakh and 20 lakh. Now the rate for loans up to Rs 10 lakh will drop another percentage point.
According to the latest Reserve Bank of India data, outstanding home loans were estimated at Rs 2,75,514 crore as on May 22. On a year-on-year basis, the growth rate had slowed to 5 per cent at the end of the third week of May, 2009 against 13.8 per cent a year ago. During the same period, non-food credit growth had slow to 17.6 per cent from 24.2 per cent. Most home loans are in the sub-Rs 15 lakh segment and with prices declining more and more people are opting for sub-Rs 30 lakh loans.
Describing the subsidy as a “positive development for small borrowers”, Union Bank of India Chairman and Managing Director M V Nair said, “It will boost demand for loans. There has been a price correction in the real estate market over the last six months and lending rates have also come down.”
Nair, who also heads the IBA, added that the move would act as a “catalyst for those who were sitting on fence”.
Renu Sud Karnad, Joint MD, HDFC, the country’s largest mortgage player, said the move would “result in increased activity in affordable real estate, which in turn will create employment”
“With real estate directly and indirectly supporting 269 industries, big and small, the move will have a positive impact on the economy,” she added.
R R Nair, director and chief executive officer, LIC Housing Finance, the country’s second-largest mortgage player, said the subsidy would help customers from rural and semi-urban areas because the ticket size of their loans is usually below Rs 10 lakh.
“It is generally the bigger cities that have loans of ticket sizes greater than Rs 30 lakh. Roughly 50-60 per cent of our loan book consists of loans below Rs 10 lakh and almost 99 per cent of our advances are below Rs 30 lakh. However, the repayment capacity of borrowers and quality of these assets will also have to be considered,” he said.
Nair suggested that it would help if the government gave lenders an assurance that it will make good their losses if a borrower defaults. “This will help take the scheme to its intended beneficiaries so that deserving people can avail of credit,” he added.
Hi I have taken a hole loan from AXIS Bank of Rs. 8,53,594/- on 02-03-2010 for 23 years and Property value is Rs. 20,80,000/- In the 2011 Budget FM has announced 1% Rate Subsidiary let me know whether am i eligible to get 1% Subsidiary and how i get the same benefit.
Sir,
I have taken home loan of Rs. 15 Lac on home costing Rs. 20 Lac in April, 2011. I have come to know that Govt. has allowed subsidy of Interest of 1% w.e.f. 1-4-11, but my bank HDFC Ltd. has not allowed this subsidy till now and is replying that whenever we will get this subsidy from Govt. We will credit your a/c.
Please advise me.
Regards,
Mukesh Saraf
Posted by: Biswajit Kar
November 26 , 2011, 16:44 IST
Sir, I have taken home loan of Rs. 14.5 Lac on home costing Rs. 23 Lac in October, 2011. I have come to know that Govt. has allowed subsidy of Interest of 1% w.e.f. 1-4-11, but my bank SBI Ltd. has not allowed this subsidy till now.
Dear Sir/Madam,
I have been taken home loan from LICHFL of Rs. 12,51,000/- on 30.08.2010 for 20 years & rate of interest applicable is 9.25% for 5 years. I want to know whether I am eligible to get 1% subsidy benefit. Please advise.
I have taken a home loan from LIC housing finance for Rs 14.50 lacs on 25.03.2011 for 20 years and rate of interest applicale 9.75% for 5 years
am i eligibale to get 1% benefit and how to get
please advise
Hi,
I have taken a loan of 1,350,000 Rs on 9.5% RI from the INDUSIND bank. In the 2011 budget FM has anounced the 1% rate susidy. Please let me know am i eligible for the subsity? If so How get that?
Please reply me, i will be waiting for your reply?
Thanks,
With warm regards
Chandru
I have taken Home loan for Rs. 9,00,000 from State Bank Of Hyderabad in Aug-2009 @9.25%(Fixed for 5 Years). Can I get 1% subsidy on my home loan? If yes then how it will appears on bank statement?
Re the interest subvention scheme, its certainly a step in the right direction. But the terms could be graded - to make it even more affordable for lower income borrowers (esp those who are first time buyers). Currently, there is the 5% interest subvention scheme for loans up to 1 lakhs (which helps the EWS segment) and now this new announcement of 1% interest subvention for loans up to 10 lakhs (which is probably going to help the MIG segment). Maybe this range (1 to 10 lakhs) could be further split into a 3% subsidy for loans up to 5 lakhs, which we (at Micro Housing Finance Corporation - a housing finance company focussed on helping urban LIG families, especially from the informal sector) think would help support the financing requirements of the LIG segment.
Content Guide
Mukherjee also allowed developers of housing projects a tax holiday under section 80 IB(10) of the Income Tax Act on profits from projects approved between April 1, 2007 and March 31, 2008, provided the projects are completed on or before March 31, 2012. Mukherjee asked developers to pass on the benefits of this tax break to consumers.
