Government employees to get house building advance at lower interest rates, says FM Nirmala Sithraman
Finance Minister Nirmala Sitharaman said the lowering of interest rates will encourage more government servants to buy new houses as they were “a major contributor” to the overall demand.Updated: Sep 14, 2019 17:40 IST
Finance ministe Nirmala Sitharaman brought good news for government employees with an announcement to lower the interest rate on house building advance available to them. The move, among other measures announced on Saturday, was aimed to give a fillip to the reality sector.
Finance Minister Nirmala Sitharaman said the lowering of interest rates will encourage more government servants to buy new houses as they were “a major contributor” to the overall demand.
“The interest rate on the house-building advance shall be lowered and linked with the 10-year G-Sec index, this will particularly benefit government servants who contribute to the demand for houses and encourage more government servants to buy houses,” Sitharaman said.
The NIFTY 10-year Benchmark G-Sec Index is constructed using the price of 10 year bond issued by the Central Government.
Government also announced a special window to set up a special corpus of Rs 20,000 crore for last-mile funding of affordable and middle income category housing projects which are not in a bankruptcy process or classified as Non Performing Assets (NPA). The government will contribute half of the funds, Rs 10,000 crore and the rest is expected to be raised from outside investors.
Sitharaman said, “The objective was to focus on construction of unfinished units,” and added that the fund set up as a category-II AIF trust would be “professionally run with experts from housing and banking sector.”
According to Bombay Stock Exchange website, Alternative Investment Funds (AIFs) are private funds such as real estate funds, private equity funds (PE funds), funds for distressed assets, etc and are registered as Category II AIFs.
Funds in Category II include AIFs such as private equity funds or debt funds for which no specific incentives or concessions are given by the government or any other regulator, says BSE India website.
“Government of India, on the lines of National Investment and Infrastructure Fund (NIIF), can contribute to the fund while the rest of the investors would be Life Insurance Corporation (LIC) and other institutions and private capital from banks, sovereign funds, DFIs etc,” said Sitharaman.
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Sitharaman said measures taken on Saturday along with the steps taken previously, like additional tax deduction of up to Rs 1.5 lakhs on interest paid and loans borrowed up to March 31, 2020 for purchase of houses valued up to 45 lakhs and the launch of repo rate linked loans for home buyers, were expected to boost demand for houses, enabling growth.
Sitharaman also mentioned the raising of liquidity support for the Housing Finance Corporation—to Rs 30,000—as a major step towards easing the liquidity pressure.
She said, she will discuss and monitor implementation of these measures in her September 19 meeting with the heads of the public sector banks.
The Nirmala Sitharaman-led finance ministry has been working on steps to boost growth in the real estate sector, a major job creating industry, which has been grappling with record unsold inventory and poor sales, according to Livemint.
At her news conference last month, Sitharaman had assured that the government was discussing steps to resolve the realty sector problems in the National Capital Region as well as cities such as Mumbai too.
An analysis by realty consultant Anarock last month found there were 1.82 lakh unsold housing units in the entire NCR in the second quarter of this calendar year. Gurugram had 56,550 units (31% share), the highest in the region, followed closely by Greater Noida 50,800 unsold units (28% share) and Ghaziabad (17%).
Over the last few weeks, the Nirmala Sitharaman has sought to address concerns over infrastructure spending, improved access to credit for businesses, more capital for state-run banks, boosting the prospects of the auto sector; and improving credit flow.
The measures come against the backdrop of the economy reporting its weakest growth in more than six years at 5% in the June quarter. The Reserve Bank of India has projected gross domestic product to expand 6.9% in 2019-20 amid adverse external headwinds such as the US-China trade war and fears of a global recession.