In order to stimulate demand for credit for housing in the middle & lower income segment of population in the country, the Government has implemented an interest subvention of 1% on all individual housing loans of upto rupee symbol download, indian currency symbol 10 lakh, provided the cost of the unit does not exceed rupee symbol download, indian currency symbol 20 lakh. For FY 2011-12 the Scheme has been extended for housing loan upto rupee symbol download, indian currency symbol 15 lakh, where the cost of house does not exceed rupee symbol download, indian currency symbol 25 lakh. The Scheme recognizes that cut in interest rates has an important role to play in reducing EMIs of borrowers and creating additional demand for housing. All regions of the States & Union Territories in the country, including rural & urban areas will be covered under the Scheme.
Objective – The objective of the Scheme is 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 middle & lower income groups. The Scheme is expected to provide relief to prospective home owners and improve home ownership in the specified target segment.
Eligibility – Interest subvention of 1 percent will be available on housing loans upto rupee symbol download, indian currency symbol 10 lakh to individuals for construction/purchase of a new house or extension of an existing house / resale of a flat or House, provided the cost of construction/price of the new house/extension does not exceed rupee symbol download, indian currency symbol 20 lakh. From FY 2011-12 interest subvention of 1% will be available for housing loans upto rupee symbol download, indian currency symbol 15 lakh, provided the cost of house does not exceed rupee symbol download, indian currency symbol 25 lakh are eligible under the Scheme. All such loans sanctioned and disbursed, during the period of the Scheme shall be eligible for the said interest subsidy.
Duration of the Scheme – The Scheme is in operation for a period starting from 1st October, 2009 to 31st March, 2013.
Interest subsidy – Subsidy of 1 per cent will be defined as reduction in interest rate by 100 basis points per annum from the existing rate of interest for a particular amount & tenor. It will be applicable to the first twelve instalments of all such loans sanctioned and disbursed during the currency of the Scheme and will be computed for 12 months on the disbursed amount. The subsidy amount will be adjusted (after receiving subsidy from Government of India) in the principal outstanding, irrespective of whether the loan is on fixed or floating rate basis.
Implementing Agencies (IAs) – The Scheme will be implemented through Scheduled Commercial Banks (SCBs), Regional Rural Banks(RRBs) and Housing Finance Companies (HFCs).
Nodal Agency – NHB will be the common Nodal Agency for this Scheme for SCBs and HFCs.
Publicity & Awareness Generation – The IAs will give wide publicity to the Scheme bringing out its salient features & benefits to the borrowers.
Terms for loan and subsidy:-
- The interest subsidy of 1 percent per annum will be admissible for the first year on the amount sanctioned and disbursed against the eligible housing loans. In case the loan amount is disbursed in parts (instalments), the interest subsidy will be calculated for one year and claimed separately for every installment of the loan disbursement falling within the operating period of the Scheme.
- The interest subsidy will be calculated on the interest chargeable at the time of disbursement of the loan.
- The agreed rate of interest would be arrived at by the IAs keeping in view the NHBs guidelines, if any, for loans upto 10 lakh (for FY 2011-12 and FY 2012-13 upto 15 lakh).
- The borrowers may choose fixed or floating rate of interest.
- The mode of disbursement of the loan will be decided by the lending IAs as per the requirement of the borrowers.
- The IAs will deduct the subsidy amount from the principal loan amount of the borrower (after receiving it from Nodal agency) and charge interest on the net amount of loan at the agreed rate of interest.
- The amount of reduction in the principal amount as a result of interest subsidy will be explained to the borrower by the SCBs/RRBs/HFCs officials. IAs will provide each borrower, covered under the Scheme, a statement which will make him/her understand the amount given as subsidy, how the subsidy has been adjusted and the impact of the subsidy on her/his EMIs.
- It will be the responsibility of the IA concerned to ensure security of the loan amount.
- The IAs will follow the appraisal, documentation, etc., as per their approved policies and procedures including those for risk assessment.
- In case a loan is foreclosed before one year the subsidy amount will be received from borrowers and returned to Government through Nodal Agency.
- In case of default/account turning NPA the subsidy will be provided to borrower on pro-rata basis and remaining subsidy will be returned to Government of India through nodal agency. In case account turns NPA after 12 months, subsidy would not be returned, as Scheme provides 1% interest subsidy for 12 months only.
- The benefit of interest subvention is restricted to only one housing unit for a single eligible borrower.
Claim Admissibility – After sanctioning and disbursing the eligible loans, the IAs will claim disbursement of subsidy from the Nodal Agency by submitting their claims on the prescribed format on monthly basis in hard and soft copy both. The subvention amount on the disbursed loan amount will be sanctioned to the IAs by the Nodal Agency on monthly basis on receipt of the claim and the necessary information in the prescribed format.
Final reimbursement claim on Government – The final quarterly reimbursement claim format the IAs can be expected to be in the quarter immediately after completion of the Scheme.
Release of Funds from Government of India – The Government of India will release the subsidy amount to the Nodal Agency based on demand for sanction of subsidy received from the Nodal Agency 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 Nodal Agency 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, RRBs and HFCs will submit a monthly consolidated return to the National Housing Bank, specifying the number of accounts, amount of loan disbursed, subvention claimed, etc. as per the formats prescribed by NHB for the purpose. The NHB will scrutinise the monthly statement and send it the Department of Financial Services (DFS), Ministry of Finance.
The impact of the Scheme will be evaluated through the Nodal Agency at the end of the operation of the Scheme.
Implementation and power to remove difficulties –
If any doubt arises on the interpretation of any paragraph of this Scheme or any instructions issued there under, the Central Government shall resolve the doubt and the decision of the Central Government shall be final.
If any difficulty arises in giving effect to the provisions of the Scheme or any instructions issued there under, the Central Government may issue order on anything which appears to it to be necessary or expedient for the purposes of removing the difficulty.