Government launches interest subsidy scheme for housing loans

The government has launched the scheme of one per cent interest subvention on all individual housing loans up to Rs10 lakh for units costing up to Rs20 lakh.

The scheme will be in operation for a period of one year starting 1 October 2009 till 30 September 2010. The finance minister had made an announcement about the interest subvention scheme in the Lok Sabha on 27 July 2009.

Subsidy of 1 per cent will be defined as reduction in interest rate by 100 basis points per annum from the existing rate of interest for a particular amount and tenor.

The scheme will be applicable to the first 12 installments of all such loans sanctioned and disbursed during the currency of the scheme and will be computed for 12 months on the disbursed amount.

The subsidy amount will be adjusted upfront in the principal outstanding, irrespective of whether the loan is on fixed or floating rate basis.

The scheme will be implemented through scheduled commercial banks (SCBs) and housing finance companies (HFCs) registered with the National Housing Bank. The RBI and the NHB will be the nodal agencies for this scheme for SCBs and HFCs, respectively.