Government to spend Rs1,100 crore on interest subsidy scheme for housing urban poor

The centre proposes to spend about Rs1,100 crore for providing interest subsidy for the construction of 3,10,000 houses for economically weaker sections and lower income groups during the next four years (2008-12).

The interest subsidy scheme for housing the urban poor (ISHUP) has been conceived by the ministry of housing and urban poverty alleviation to make the housing affordable and within the repaying capacity of economic weaker section/lower income group. The scheme encourages poor sections to avail of loan facilities through commercial banks/HUDCO for the purposes of construction of houses and avail 5.0 per cent subsidy in interest payment for loans of up to Rs1 lakh, a government release said.

The scheme will leverage flow of institutional finance for the EWS and LIG segment households to create an additional housing stock of 3,10,000 houses for EWS and LIG segments over the next four years (2008-12). Out of this, 2,13,000 dwelling units are targeted for EWS housing and 97,000 units for LIG housing.

Households with monthly income of up to Rs3,300 are classified as EWS while those with monthly income between Rs3,300 and Rs7,300 are termed LIG.

Loan will be available for construction of new houses. Loan repayment periods will be permissible generally ranging form 15-20 years. The subsidy will be 5.0 per cent per annum for EWS and LIG, admissible for a maximum loan amount of Rs1 lakh over the full period of the loan. Beneficiary borrowers may choose fixed or floating rates (the consequences clearly explained to the borrowers by PLIs). An additional 1 per cent per annum maximum will be permitted to be charged by banks/HFCs if fixed rate loans are extended. This will be subject to reset after a minimum period of five years.

Mortgage of the dwelling unit will be accepted as primary security. However, there would be no collateral security/third party guarantee for loans up to and inclusive of Rs1 lakh excluding group guarantee. No levy of prepayment charges would be permitted.