India is contemplating spending Rs 60,000 crore ($7.2 billion) to provide subsidised loans for small urban housing over the next five years, according to Reuters report.
The banks are expected to introduce this scheme in the next couple of months, ahead of key state elections later this year and general elections due in mid-2024.
The plan for subsidised loans was announced by Prime Minister Narendra Modi, during his Independence Day speech, but the specific details had not been previously reported.
The Prime Minister had stated, "We are coming up with a new scheme in the coming years that will benefit those families that live in cities but are living in rented houses, or slums, or chawls and unauthorised colonies,"
As per the report, the government official stated that the scheme for beneficiaries is nearing finalisation and will need approval from the federal Cabinet.
"The interest subvention will be credited upfront to the to the housing loan account of beneficiaries. The scheme proposed till 2028 is close to finalisation and will require approval of federal Cabinet," one government official said.
According to the official, the scheme has the potential to benefit 2.5 million loan applicants from low-income groups in urban areas. However, the amount of subsidised credit provided will depend on the demand for affordable housing.
Under this scheme, housing loans below Rs 50 Lakh with a tenure of 20 years will be eligible. It will offer an annual interest subsidy ranging from 3 per cent to 6.5 per cent on up to Rs 9 Lakh of the loan amount.
Lenders have not been given any specific lending targets, but they expect to have a meeting with government officials soon, according to two bank officials. In anticipation of the meeting, banks have already started identifying potential beneficiaries.
This proactive approach could potentially lead to an increase in lending for affordable housing within the home loan portfolio.
The government has previously implemented interest subsidies for lower-income borrowers in urban areas. From 2017 to 2022, a similar scheme resulted in the sanctioning of 12.27 million homes.
An appeal from Swarajya
At Swarajya, we rely on our readers' support through subscriptions to sustain our media platform. Unlike larger conglomerates, we are unable to relentlessly chase advertising money — our model is largely built on your patronage.
Your support has never been more crucial. We work tirelessly to deliver 10-15 high-quality articles daily, ensuring you receive insightful content from 7 AM to 10 PM.
If you believe India's story has to be articulated in a way it has never been done before without shrugging it off, become a patron (or) subscribe now for ₹̶2̶4̶0̶0̶ ₹1999 and get 12 print issues, unlimited digital access for 1 year, a special India that is Bharat T-shirt (Offer ends soon).
We are counting on you!