Scheme of 1% Interest Subvention for Housing Loans upto Rs. 15 Lakh

1% Interest Subvention Scheme for Housing Loans Introduction From FY , the Government of India introduced an interest subvention Scheme of 1% p.a. for the first year on all individual housing loans up to Rs.10 lakh, provided the cost of the unit does not exceed Rs. 20 lakh. From FY the limit of individual housing loans has been enhanced to Rs.15 lakh, provided the cost of the unit does not exceed Rs. 25 lakh. All regions of the States & Union Territories in the country, including rural & urban areas will be covered under the Scheme.

Objective To provide interest subsidy on housing loan as a measure to generate additional demand for credit and to improve affordability of housing to eligible borrowers in the lower & middle income groups. To provide relief to prospective home owners and improve home ownership in the specified target segment. Duration of the Scheme In starting the Scheme was operational for a period from 1 st October, 2009 to 30th September, Now the Scheme has been extended up to 31 st March 2013.

Eligibility Interest subvention of 1 percent will be available on housing loans up to Rs. 10 lakh (Now enhanced to Rs. 15 lakh) to individuals for construction/ purchase of a new house or extension of an existing house. The cost of construction/price of the new house/ extension does not exceed Rs. 20 lakh (Now enhanced to Rs. 25 lakh). All such loans sanctioned and disbursed, during the period of Scheme shall be eligible for the said interest subsidy.

Agencies Involved Implementing Agencies (IAs) – The Scheme will be implemented through Scheduled Commercial Banks (SCBs) and Housing Finance Companies (HFCs) registered with the National Housing Bank (NHB). Nodal Agencies – For the years , the RBI and the NHB were the Nodal Agencies for this Scheme for SCBs and HFCs, respectively. From FY NHB has been designated as Sole Nodal Agency for this Scheme for both HFCs and SCBs.

Claim Admissibility After sanctioning and disbursing the eligible loans, the IAs will claim subsidy from the nodal agency in the prescribed format on monthly/ consolidated basis. The subsidy amount on the disbursed loan amount will be sanctioned to the IAs by the respective Nodal Agencies on monthly basis on receipt of the claim and the necessary information in the prescribed format. Release of Funds from GoI - The Government of India will release the subsidy amount to the Nodal Agencies based on demand for sanction of subsidy received from the nodal agencies on quarterly basis.

Utilisation Certificates The IAs will be required to ensure proper end-utilization of the funds and to submit utilization certificates to their respective NA against the amount of the interest subsidy released to them. The utilization certificate will be submitted in the prescribed form. Inspection of Accounts - The IAs will flag all the loans covered under the Scheme in their books of accounts for the purpose of inspection by the specified authority. Monitoring and Evaluation All SCBs and HFCs will submit a monthly consolidated return to the National Housing Bank, specifying the number of accounts, amount of loan disbursed, subvention given, etc., as per the formats prescribed by RBI/NHB for the purpose.

NHBs’ Initiative NHB has issued revised Guidelines to all Scheduled Commercial Banks (including Public Sector Banks, Private Sector Banks and Foreign Banks in India) and all HFCs registered with NHB for speedy implementation of the Scheme and submission of subsidy claims to NHB. NHB has also requested Convener SLBC of various states to include the Scheme as an regular agenda item. NHB has prepared an excel sheet with features like automated checking of sanctioned loan amount not exceeding 15 lakh, cost of house not exceeding 25 Lakh and calculation of subsidy amount. To facilitate the Banks and HFCs to submit their claims without any discrepancy, the same has been uploaded on NHB’s Website. To reduce the time lag in disbursement of the subsidy amount, NHB has proposed to place upfront certain amount of funds with public Sector Banks

Status of Claims For Financial Year , claims amounting to Rs crore has been submitted to DFS, MoF. For Financial Year , DFS, MoF had released interest subsidy amounting to 300 crore for onward disbursement to Banks/HFCs. Total Budget allocation under the Scheme for FY was Rs. 300 crore and the same has been achieved with the cooperation of various stakeholders.

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