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Low-cost housing loans of Rs 15 lakh to get 1% interest sop

FM also increased the value of houses eligible for availing interest subsidy by Rs 5 lakh to Rs 25 lakh per unit.

Written by Agencies | New Delhi |
February 28, 2011 11:37:22 am

In a move that could encourage buyers of low cost houses,the Finance Minister Pranab Mukherjee today said the one per cent interest subsidy will be available on home loans of up to Rs 15 lakh against the current level of Rs 10 lakh.

Announcing this in his Budget for 2011-12,Mukherjee also increased the value of houses eligible for availing the interest subsidy by Rs 5 lakh to Rs 25 lakh per unit.

“To further stimulate growth in housing sector,I am liberalising the existing scheme of interest subvention of one

cent on housing loans by extending it to housing loan up to Rs 15 lakh,where the cost of the house does not exceed Rs 25 lakh from the present limit of Rs 10 lakh and Rs 20 lakh respectively,” he said while presenting the Budget.

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The government also enhanced the existing housing loan limit to Rs 25 lakh from Rs 20 lakh under priority sector lending on account of increase in prices of residential properties in urban areas,he added.

On the development of homes for poors,Mukherjee said: “Credit enablement of economically weaker sections (EWS) and LIG (low income group) households is a serious challenge. To address this issue,I propose to create a Mortgage Risk Guarantee Fund under Rajiv Awas Yojana.

“This would guarantee housing loans taken by EWS and LIG households and enhance their credit worthiness”.

Mukherjee also announced enhancing the provision under Rural Housing Fund to Rs 3,000 crore from the existing Rs 2,000 crore to provide housing finance in rural areas at competitive rates.

Welcoming the moves,analysts and real estate developers said these proposals are likely to encourage builders to give more emphasis to projects costing up to Rs 25 lakh.

The country’s largest realty consultant Jones Lang LaSalle India Chairman and Country Head Anuj Puri said firms such as Unitech and Ansals,which are rolling out budget housing,will be benefited by increase of volumes.

“The one per cent interest subvention for home loans up to Rs 15 lakh from the previous limit of Rs 10 lakh will come as a relief to home loan borrowers from the LIG segment,” he said,adding raising the priority home loan limit is also a good news for the LIG segment.

Puri,however,said it is unlikely to help and “ease the pain in the metropolitan cities where real estate prices and therefore demand for affordable housing is highest”.

Another consultant Cushman & Wakefield said the proposal will help developing affordable houses in smaller cities.

“The announcement…will enable to create a demand for housing in smaller cities,where housing is available for a ticket size of less than Rs 25 lakhs. This is expected to increase the development momentum in such locations,” Cushman & Wakefield India Managing Director Anurag Mathur said.

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