Press Information Bureau
Government of India
Ministry of Finance

25-October-2011 14:48 IST

The Union Cabinet today approved the proposal under 1% interest subvention on housing loan scheme liberalising the limit of housing loan upto Rs.15 lakh where cost of the house does not exceeding Rs.25 lakh from the present limit of Rs.10 lakh and Rs.20 lakh respectively, and designating National Housing Bank (NHB) as the Nodal Agency (NA) for implementing the scheme both for Scheduled Commercial Banks and Housing Finance Companies.

A budgetary provision of Rs.500 crore has been made for the financial year 2011-12 for implementing the scheme.

Background:

The existing scheme of 1% interest subvention of housing loans upto Rs.10 lakh, provided the cost of the housing unit does not exceed Rs.20 lakh was approved by the Cabinet in September, 2009. The scheme provides interest subsidy on housing loans as a measure to generate additional demand for credit and to improve affordability of housing to borrowers in the lower and middle income groups. Reserve Bank of India and National Housing Bank were designated as the nodal agencies for implementing the scheme for Scheduled Commercial Banks and Housing Finance Companies respectively.

Consequent upon raising the eligibility limit of the housing loan, limit of subsidy for an individual borrower would increase to Rs.14,865 for a loan of Rs.15 lakh on reducing balance basis from the present limit of Rs.9910 for a loan of Rs.10 lakh.

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Interest subvention on housing loans expanded to higher loan and house-cost limits, raising borrower subsidy and national implementation. Cabinet expanded the 1% interest subvention scheme by increasing eligible housing loan limit to Rs.15 lakh where house cost does not exceed Rs.25 lakh, designating the National Housing Bank as nodal agency for both scheduled commercial banks and housing finance companies, and providing a budgetary allocation for the financial year to support implementation; the change raises the maximum per-borrower subsidy entitlement on a reducing-balance basis compared with the previous loan ceiling.