Interest subvention for low-cost housing loans extended by a year

The government has cleared a proposal to extend interest subvention of one per cent for low-cost housing loans up to Rs 15 lakh till March 31, 2013.

The decision, taken by the Cabinet yesterday, is expected to provide relief to small housing loan borrowers, as well as the real estate sector, which is going through a slump, owing to low demand and high interest rates.

The decision would implement a proposal made in the Budget. The proposal relates to a total housing cost of up to Rs 25 lakh. A Budgetary provision of Rs 400 crore was made for this for the current financial year. National Housing Bank (NHB) is the nodal agency for implementing the scheme.

The original scheme of one per cent interest subvention was launched in 2009-10 for loans of up to Rs 10 lakh, provided the housing cost was not more than Rs 20 lakh. The scheme was revised for 2011-12 to make loans of up to Rs 15 lakh eligible, provided the housing cost did not exceed Rs 25 lakh.

Affordable housing has not gained much acceptance among developers, due to the high cost of land, the low floor space index and the innumerable approvals required for a project. Currently, only a very few developers operate in the below-Rs 25 lakh category.

A few months earlier, Mahindra and Mahindra’s realty arm, Mahindra Lifespaces, announced plans to venture into the segment, with houses priced between Rs 7 lakh and Rs 15 lakh in Maharashtra and Tamil Nadu. Other companies operating in this segment include Tata Housing, the Usha Martin Group, Jerry Rao’s Value and Budget Housing Corporation.

Other proposals on the anvil
The Cabinet is expected to take a decision next week on the proposed national policies on information techonogy (IT), electronics, telecom and IT Minister Kapil Sibal said on Wednesday.

These policies aim to raise revenue of both the sectors to $700 billion (Rs 3.8 lakh crore) over the next eight years.

It is likely to soon take up the proposal of restructuring about Rs 2 lakh-crore debt of power distribution companies, whose precarious financials have raised concerns of default in the banking system. According to power ministry officials, the proposal has been finalised.