The Centre is about to finalise a scheme aimed at making housing more affordable for the poor in urban areas, by providing them with home loans at subsidised interest rates.
The scheme basically proposes to increase credit flow to the economically weaker sections (EWS) and lower income groups (LIG) who find it difficult to purchase a house due to problems in getting loans from banks and the high interest rates prevailing in the financial market.
Under the scheme, which is being given finishing touches by the Ministry of Housing and Urban Poverty Alleviation, a five-year rebate on the interest payable on the housing loan amount will be given to borrowers from low-income households.
According to a senior official, the loans will be made available at reduced interest rates by designated public sector banks and government-run lending agencies in all states. These, in turn, will be compensated by the ministry for the difference between market rates and the lower rates.
The minister in-charge, Kumari Selja, is said to be keenly pursuing the scheme, which is likely to be sent for approval by the Cabinet within this month itself. A budgetary provision of Rs. 30 crore has been made for the proposal for the current year.
“Today, non-tax payers are not able to take advantage of the fiscal concessions available to tax-paying home loan borrowers, which effectively reduces interest rates on their loans. So there is a need to provide tax neutrality by way of interest subsidy to EWS and LIG housing loan borrowers,” the official explained.
The urban areas are witnessing an acute housing shortage due to large-scale migration of employment-seekers from villages. According to Census 2001, about 15 per cent of the urban population lives in slums. As per the findings of the 58th round of the National Sample Survey Organisation, there were as many as 51,688 slums in 640 cities in 2002.
The acute housing shortage in cities is basically due to the fact that the lowest 35 to 40 per cent of urban households, a majority of which belong to the EWS and LIG segments, lack purchasing power. With this in view, the government is now making attempts to bring home loans within their reach.