Aimed at helping homebuyers and boosting the real estate sector, the Indian government is considering spending Rs 600 billion ($7.2 billion) to provide subsidised home?loans for small urban housing over the next five years, two government sources told Reuters.
Banks are likely to roll out the scheme in a couple of months, ahead of key state elections later this year and general elections due mid-2024. Last month, India?cut cooking gas prices for households by about 18% to rein in inflation ahead of elections.
Prime Minister Narendra Modi had announced the plan in a speech in August to mark the country's Independence Day, but its details had not been previously reported.
The scheme will offer an annual interest subsidy of between 3%-6.5% on up to Rs 0.9 million (Rs 9 lakh) of the loan amount. Housing loans below Rs 50 lakh availed for a tenure of 20 years will be eligible for the proposed scheme, the sources said.
"The interest subvention will be credited upfront to the housing loan account of beneficiaries. The scheme proposed till 2028 is close to finalisation and will require approval of federal Cabinet," one government official said, as per Reuters report.
The scheme could benefit 2.5 million loan applicants in low-income groups in urban areas but the quantum of subsidised credit will depend on demand for such homes, the official said.
"We are coming up with a new scheme in the coming years that will benefit those families that live in cities but are living in rented houses, or slums, or chawls and unauthorised colonies," PM Modi had said in his August speech.?The officials did not want to be named as the scheme is under finalisation.
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As of now, lenders have not been provided any specific lending targets but a meeting with government officials is likely soon, two bank officials said, as per the report.?Banks have started to identify beneficiaries, they said, adding that the move could help increase lending in the affordable housing segment within the home loan portfolio.
This is not the first time the government has offered interest subsidies to lower-income borrowers in urban areas. A similar scheme ran between 2017-2022 with 12.27 million homes sanctioned under it. Click here to learn about that scheme.
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