Aiming at bolstering the sagging economy as well as providing housing to all, the urban poor will get 5 per cent interest subsidy for home loans up to Rs 100,000, taken during the Eleventh Plan period.
The scheme, approved by the Cabinet Committee of Economic Affairs, will make the housing dreams of economically weaker sections of urban areas come true as the subsidy is fixed keeping in mind the repayment capacity of the section of society, Home Minister P Chidambaram told reporters in New Delhi on Friday.
The total subsidy, which would amount to Rs 1,100 crore (Rs 11 billion), is expected to leverage institutional finance of Rs 3,870 crore (Rs 38.70 billion).
"The interest subsidy scheme is expected to supplement the efforts of the government started through the mission to comprehensively address the housing shortage. Subsidy of 5 per cent per annum will be given for loans of Rs 100,000," Chidambaram said.
The loan repayment period would vary between 15 and 20 years.
The scheme will result in creation of additional housing stock of 3.10 lakh houses for economically weaker section (EWS) and low income group (LIG) households over the next four years.
Of the total, 2.13 lakh (213,000) dwelling units will be for the EWS and 0.97 lakh (97,000) for LIG housing, he said.
The National Housing Bank and Housing and Urban Development Corporation will be the nodal agencies for disbursement and monitoring of the subsidy and banks, micro finance institutions and others will have the option to avail of the resources.
In 2005-06, when the national housing shortage was estimated at about 24.7 million, the government launched Jawaharlal Nehru Urban Renewal Mission for providing affordable houses, under which 1.5 million houses are being built for ESW.
Under the programme, slums have also been upgraded and would be given basic municipal services which would entail around Rs 40,000 crore (Rs 400 billion), half of which will be borne by the Centre.