Employees of the Central Government who want to develop their own house can apply for a House Building Advance (HBA). The HBA availed from October 1, 2020 to March 31, 2022, for a total of 18 months, a basic interest rate of 7.9% shall be charged. The interest rate on a House Building Advance (HBA) will be related to the 10-year G-Sec yield on the amount borrowed for home construction. The government has already updated the House Building Advance (HBA) guidelines for Central Government Employees, taking into account the 7th Pay Commission's approved provisions.
According to the official memorandum issued by the Government of India, Ministry of Housing & Urban Affairs Housing-III Section, the issuance of a House Building Advance to Central Government workers is governed by the Ministry of Housing and Urban Affairs (erstwhile Ministry of Urban Development) rules and regulations, which are updated periodically. An employee can only utilise a House Building Advance (HBA) for one of the following reasons:
House Building Advance Rules
- Constructing a new home on the employee's or spouse's plot or land, either jointly or individually.
- Buying a plot of land and building a house on it.
- Buying a plot of land under a cooperative scheme and building a house or flat on it, or purchasing a house through participation in Cooperative Group Housing Societies.
- Purchase/construction of a house via self-financing initiatives in Delhi, Bangalore, Uttar Pradesh, Lucknow etc.
- Outright purchase of a new ready-built house/flat from Housing Boards, Development Authorities, and other statutory or semi-Governmental entities, as well as from authorized builders, such as architects, house building societies, and so on, but not from private entities.
- Remodelling of living accommodation in a house purchased by the employee or jointly with his or her spouse. Under these guidelines, the overall cost of the existing structure (excluding land costs) and proposed additions should not surpass the specified cost threshold.
- Reimbursement of a loan or advance obtained from the government, HUDCO, or private sources, subject to specific restrictions, even if construction has initiated.
- Current employees who have availed of home loans from banks and other financial institutions are eligible to join this initiative, provided they satisfy certain standards.
- Only the residential portion of a building may be constructed on a plot designated for a shop-cum-residential plot in a residential colony, pursuant to a cost limitation.
Amount of advance
- During the government servant's entire employment, only one advance will be allowed.
- For construction/purchase of a new house/flat, the maximum amount of advance shall be 34 months basic pay up to a limit of Rs. 25 lakhs, or the cost of the house/flat, or the amount as per repaying capacity, whichever is the least.
- The amount of HBA for expanding an existing house will be restricted to 34 months basic salary, up to a maximum of Rs.10 lakhs, or the cost of the extension, or the amount according to repaying ability, whichever is the least.
- In the event of building in rural regions, the amount of the advance must be limited to 80% of the actual cost of the land and construction of the house or the cost of expanding living accommodations. If the head of the Department declares that the relevant rural region is within the borders of a town or city, this can be eased and 100% advance will be sanctioned.
- A simple interest rate of 7.9% shall be charged on the HBA taken out from October 1, 2020 to March 31, 2022, for a total of 18 months.
- The HBA recovery process will remain the same as before, with principal recovered first in the first fifteen years in no more than 180 monthly instalments and interest recovered in the next five years in no more than 60 monthly instalments. From the date of the first instalment payment, the advance accrues basic interest respectively.
- In the event of a change in the rate of interest, any subsequent tranches/ instalments of HBA taken by the employee in various financial years will be regulated by the relevant rate of interest in the year in which the HBA was permitted.
The repayment capacity of the central government employee should be assessed as follows for the purpose of determining the acceptable loan amount:
- Employees who retire after 20 years are entitled to 40% of their basic pay.
- In case an employee retires after 10 years but not later than 20 years: Up to 40% of the basic pay, 65% of DCR Gratuity may also be adjusted.
- In case of an employee retiring within 10 years: Up to 50% of basic pay DCR Gratuity up to 75% can be adjusted.