Govt plans on housing loan sops for urban poor
Economic Times, NEW DELHI:
The Centre has planned a New Year bonanza for the urban poor.
To ensure shelter for the marginalised in big cities, the housing ministry has finalised a scheme aiming to extend subsidy of 5% on market rate of interest on housing loans for a period of five years for economically weaker sections (EWS) and low income group (LIG) families.
The ministry estimates that about 26 million additional houses will be required during the 11th Five Year Plan (2007-12) and 99% of this shortage will be in the EWS and LIG segments.
The scheme will help banks and housing finance institutions get market-related returns on the perceived higher risk on lending to this segment of society.
Under the scheme, the government will provide interest subsidy on loans up to a maximum of Rs 80,000 in the EWS category and Rs 1.50 lakh in the LIG category.
The tenure of loans will be five years. According to the government's recent re-categorisation of income slabs, an EWS family had a monthly income of Rs 3,000 while an LIG family had a monthly income of Rs 6,300.
The ministry felt that a person belonging to the EWS category could not service a housing loan of even Rs 80,000 at the existing market rate of around 11%.
Mainstream banks do not take the risk of lending to this section of society. The proposal, estimated to cost Rs 14,000 crore, also aims to keep the monthly outgo on account of loan repayment low.
"The plan is to ensure that the EMI remains less than 20% of the monthly family income of the beneficiary," a senior official said.
"It will enhance the affordability of EWS and LIG segments and also help banks to provide loans to this section of society," the official added.