Modi Govt Plans Rs 60,000 Cr Subsidised Housing Loan Scheme: All You Need To Know

The Indian government may spend Rs 60,000 crore ($7.2 billion) over the next five years to offer subsidised housing loan schemes for borrowers as per a report from Reuters. The scheme would provide a 3-6.5% annual interest subsidy on loans up to 0.9 million rupees. According to government officials quoted by Reuters, housing loans under five million rupees taken out for a 20-year term will be eligible for the planned scheme.

The initiative will likely be implemented by banks in a few months, precisely in time for key state elections later this year and the mid-2024 general elections. According to media reports, the program may help 2.5 million low-income urban loan applicants. The anticipated subsidised home loan scheme is covered in depth in this article, according to an interview with Rahul Mehrotra, MD & CEO, RHDFCL and Pramod Kathuria, Founder and CEO of digital home loan marketplace, Easiloan.

How does the interest rate on loans under this scheme compare to the prevailing market rates?

At present, such interest subvention schemes have been offered by the Government to the Agricultural, Educational and MSME sectors. Interest subventions are also very common between related parties or group companies.

The interest rate under subvention schemes shall be on subsidised rates. Banks shall grant loan to borrowers at subsidised rate and later on, can claim that subsidised rate portion from the Government.

The subsidised housing loan scheme features interest rates lower than prevailing market rates. Such a government-backed initiative is designed to make housing more affordable for borrowers. Loans under this scheme are aimed at stimulating housing demand, encouraging homeownership, and promoting growth of the real estate sector. Lower interest rates imply lower monthly payments for borrowers, making housing more accessible to a wider population, and potentially spurring economic activity in the construction and housing industries.

What measures are in place to prevent misuse or fraud in accessing these subsidized housing loans?

To prevent fraud and ensure the intended use of the scheme, several measures have been put in place. These include strict eligibility criteria, rigorous document verification, audits, transparent application processes, technology-driven monitoring, public education, and third-party validation in the subsidised housing loan scheme. Here are some measures that need to be considered while accessing subsidized housing loans.

Verification the KYC

Verification of salary slips with Employer;

Salary amount should be compared with Bank Statement;

Fair valuation, valuation should be done by Independent Valuers.

Internal Due Diligence should be put in place.

In order to ensure end use of the Loan, inspection/ verification of the property should be done whether it is residential or commercial property.

Original documents should be called for verification at the time of sourcing any housing loans.

Will there be any specific provisions or benefits for economically weaker sections or marginalized communities within this housing loan scheme?

The borrowers shall have loans at subsidised rate. The benefit of interest subvention schemes;
To boost the sales of low-cost housing

EMI of the borrower shall scale down

Additional interest subvention can be also granted if payments are made before the due dates.
Other specific provisions can be shared once the new scheme is introduced.

What is the application process for borrowers interested in availing this subsidized housing loan, and what documents or eligibility criteria will be required?

The application process for borrowers interested in availing of this subsidized housing loan shall be like it for other loans, however, banks may pass the interest subsidy based on the following class of borrowers in accordance with their risk profiles.
Profile of the customer ( salaried /Self-employed)

Income assessment ( documented, semi-documented, bank-salaried and cash salaried)

Type of collateral

Credit history of the customer

To ensure that the housing loan scheme is accessible for the intended section of the population, the application process would likely involve submitting necessary documents such as income proof, identity verification, and property details. Income level, property value, and credit history may be used to determine eligibility for the scheme.

Who does it apply to? What are the benefits?

The subsidised housing loan scheme is expected to benefit an estimated 2.5 million loan applicants in low-income groups in urban areas, such as families that live in cities on rent, or slums, or chawls and unauthorised colonies.

The scheme aims to subsidise housing loan interest rates to facilitate affordable homeownership. This could further create a positive impact by enabling improved housing conditions and economic stability for the beneficiaries, ultimately leading to the growth of the housing sector and the overall economy.

Note - Above information is based on existing subvention schemes and the proposed Rs 60,000 Crores housing loan interest subsidy scheme may not exactly in-line existing subvention schemes.

Responses compiled on subsidised housing loan scheme based on an interview conducted with Pramod Kathuria, Founder and CEO of digital home loan marketplace, Easiloan

How does the interest rate on loans under this scheme compare to the prevailing market rates?

The scheme offers an annual interest subsidy of between 3-6.5% on up to 0.9 million rupees of the loan amount. However, it is not clear how these interest rates compare to the prevailing market rates.

What measures are in place to prevent misuse or fraud in accessing these subsidized housing loans?

The government has not yet disclosed specific measures to prevent misuse or fraud in accessing these subsidized housing loans. However, we believe that the banks will have robust processes in place to ensure that the loans are disbursed only to eligible borrowers.

Will there be any specific provisions or benefits for economically weaker sections or marginalized communities within this housing loan scheme?

The scheme is aimed at providing support to low and middle-income families looking to purchase homes in urban areas. Housing loans below INR 50 lakhs will qualify for the scheme. However, there is no information available on any specific provisions or benefits for economically weaker sections or marginalized communities within this housing loan scheme.

What is the application process for borrowers interested in availing of this subsidized housing loan, and what documents or eligibility criteria will be required?

The application process and eligibility criteria for the subsidized housing loan scheme have not been disclosed yet. However, it is expected that banks will roll out the scheme in a couple of months. We anticipate that the application process will be similar to that of other housing loans, and borrowers will need to provide proof of income, identity, and address, among other documents.

Easiloan believes that the subsidized housing loan scheme will benefit low and middle-income families looking to purchase homes in urban areas. The scheme offers an annual interest subsidy of between 3-6.5% on up to 0.9 million rupees of the loan amount, and it is expected to benefit around 25 lakh home loan applicants in low-income groups in urban areas. We look forward to supporting our customers in availing of this scheme once the application process is announced.

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