Govt launches interest subsidy scheme for low-cost homes

The interest subsidy scheme to promote low-cost housing was announced by the Finance Minister Pranab Mukherjee in his reply to the debate on the budget for 2009-10 in Parliament in July.

Mukherjee had allocated Rs 1,000 crore for the interest subsidy scheme which will remain in operation for a year from October 1,2009 to September 30,2010.

Under the scheme,one per cent subsidy will be given on first 12 Equated Monthly Installments (EMIs) to be paid by the borrowers to the banks.

The scheme will cover all regions of the country and is expected to give a boost to credit flow to the housing sector and create additional employment in the housing and allied sectors,such as steel and cement,the release said.

The interest subsidy will be routed through the commercial banks and the housing finance companies registered with the National Housing Bank.

The allocation of Rs 1,000 crore and the guidelines of the scheme were approved by the Cabinet on September 10.2009.

An amount of Rs 300 crore will be allocated in the Budget of 2009-10 for implementation of the scheme while the balance amount will be allocated in the Budget next year.

The subsidy amount will be adjusted upfront in the principal outstanding,irrespective of whether the loan is on fixed or floating rate basis.

The government said the number of beneficiaries covered under the scheme will depend upon the size of the loan amount and the number of beneficiaries approaching for interest subsidy.

“Being a demand driven scheme no specific targets for coverage of beneficiaries have been fixed,” the release added.