Good News For Home Buyers: Govt Mulling Rs 600 Billion Housing Loan Interest Subsidy Scheme

In what is seen as a piece of good news for home buyers in India, the Indian government is reportedly considering a housing loan interest subsidy scheme, in a move that can likely benefit 2.5 million loan applicants belonging to the low-income groups in urban areas.

India is considering spending 600 billion rupees ($7.2 billion) to provide subsidized loans for small urban housing over the next five years, said a Reuters report citing two government sources.

If this scheme is implemented, the dreams of thousands of people who want to have a home of their own will come true.

According to the officials, the quantum of subsidized credit will depend on demand for such homes. According to the report, in his Independence Day speech on August 15, Indian Prime Minister Narendra Modi announced the plan to mark the country's Independence Day. However, the details of this scheme have not been previously reported.

As per sources, the scheme will offer an annual interest subsidy of between 3-6.5% on up to 0.9 million rupees of the loan amount. Housing loans below five million rupees availed for a period of 20 years will be eligible for the proposed scheme.

Banks are expected to roll out the scheme in a couple of months, prior to the key state elections later this year and Lok Sabha elections due in mid-2024. Last month, the government slashed cooking gas prices for households by almost 18% to control inflation ahead of elections.

Lenders have so far not been given any specific lending targets but a meeting with government officials is expected soon, two bank officials told Reuters. However, according to them, banks have started identifying beneficiaries. It is also believed that the move could help raise lending in the affordable housing segment within the home loan portfolio.

Noticeably, this is not the first time the government has offered interest subsidies to lower-income borrowers residing in urban areas. A similar scheme existed earlier between 2017-2022 with 12.27 million homes sanctioned under it.