The Advantages Galore of Interest Subvention on Housing Loans

What is Interest Subvention?

The latest hot news maker after demonetisation seems to be the interest subvention. Simply stated, it is a subsidy provided on interest rates. Let us understand this concept with reference to housing loan rates.

Affordable Housing — Explained in relation to Interest Subvention

Affordable housing has a skewed definition. Depending on which tier the city falls into or based on rural and urban areas, the range of any affordable housing property that lies anywhere from Rs.30–70 Lac. Now keeping in mind the low income groups or even the emerging middle class, the above range is hardly affordable. The government has brought some clarity to it by announcing interest subvention on loans up to Rs. 9 Lac and up to Rs. 12 Lac.

The government has declared an interest subvention of 3% and 4% on housing loans of up to Rs 12 Lac and Rs 9 Lac, respectively. This declaration has been made under the Prime Minister Awas Yojana (PMAY). It is expected to provide an impetus to low income housing, especially, on the fringes of urban localities all over the nation.

In rural areas, it has been decided to give a 3% subvention on housing loans of up to Rs 2 Lac for building and expanding existing houses. The government has also declared that the number of houses to be built in rural areas have been increased by 33% over the existing sanctioned number.

Owing to these measures the following positives will emerge

• The real estate market will see a boost in the outskirts of various metros like Pune, Mumbai, Ahmadabad, Delhi, Hyderabad and Bangalore. This is where the maximum work force migrates in search of livelihood.
 • Other than the interest subvention, an interest subsidy of up to Rs. 2.2 Lac has been declared for home buyers on housing loan rates. Both these measures will bring down the size of EMI.
 • Consequently, people will now prefer to pay EMI and own a housing property than renting one.s
 • Banks and Financial institutions will now come up with innovative and affordable home loan products.

These step by step initiatives of the government for lower income groups will not only benefit them but also provide a boost and a direction to the real estate industry. It is a definite action towards the “Housing for All”, by the year 2022, vision of the Government.