News: Boost for Affordable Housing- 08.01.2017
Bangalore
The higher interest subvention announced last week will promote budget housing.
Under the 'Housing for All by 2022' scheme, the government has already announced various benefits, including interest subsidy for homebuyers. The 'Housing for All Mission' for urban areas is being implemented during 2015-22. The mission will be implemented through four verticals, giving options to beneficiaries, urban local bodies (ULBs) and State governments.
The options are:
- 'In Situ' slum redevelopment
- Affordable housing through credit-linked subsidy
- Affordable housing in partnership
- Subsidy for beneficiary led individual house construction.
Out of these, affordable housing through credit-linked subsidy will be implemented through banks and financial institutions. A beneficiary can take advantage under only one of the components. The mission is effective from June 2015 to March 2022.
The scheme covers 4,041 statutory towns. Individuals from the economically weaker section (EWS) and low income group (LIG) seeking a housing loan from a bank, housing finance company or such institution are covered. Credit-linked subsidy will be available on housing loans availed for new constructions and extensions to existing dwelling units as incremental housing. A beneficiary can build a house of a larger area but the interest subvention was limited to the first Rs 6 lakhs only.
Now, further liberalisation has been announced. The new scheme announced by the Prime Minister on New Year's eve is bound to give a major boost to the affordable housing sector. The Prime Minister announced certain incentives for low-cost housing. This will benefit homebuyers looking at affordable housing. The government has decided to provide an interest subvention of three percent and four percent for loans of up to Rs 12 lakhs and Rs 9 lakhs respectively, under the Pradhan Mantri Awas Yojana (PMAY).
The Prime Minister announced measures, including financial assistance for the urban and rural poor, to buy or build homes. This is another step in the direction of achieving the objective of 'Housing for All by 2022'. This decision is expected to promote budget housing in the peripheral localities of urban areas as demand for such housing projects will go up.
The government has also decided to increase the number of homes to be built in rural areas under the PMAY Gramin by 33 percent. A couple of months ago, the government approved the construction of 1.97 lakh additional affordable houses under the PMAY Urban, launched in June last year, taking the total to 12.83 lakh units.
In addition to these, a three percent subvention will be given on loans of up to Rs 2 lakhs to build a new house or to expand an existing house in rural areas.
These measures will provide a strong boost to mass housing in the peripheral areas of metro cities.
Under the government's existing credit-linked subsidy scheme, beneficiaries seeking housing loans are eligible for an interest subsidy of 6.50 percent for tenure of 15 years, or during the tenure of loan, whichever is lower, on the initial Rs 6 lakhs. Now, the four percent cut in interest rate will empower many more prospective homebuyers to buy a home.
Simultaneously, banks have also started reducing their lending rates. This, along with the interest subsidy, will bring down the EMIs and promote affordable housing. With the demand and potential, developers will be motivated to focus more on this segment.
Ashish Gupta, Times Property, The Times of India, Bangalore
