Govt housing stimulus package may galvanise housing activity

KOLKATA: The UPA government���s latest Rs 1,000-crore housing stimulus package, under which new home loan borrowers will get an upfront 1% interest rate waiver, is expected to galvanise housing activity nationally. Property consultants expect at least Rs 2 lakh crore worth of greenfield real estate ventures to happen in the next one year alone, thanks to the new stimulus package.

Significantly, the housing stimulus scheme is also expected to result in Rs 1 lakh crore of home loans between October 2009 and September 2010.

Under the scheme, the 1% interest subsidy will be offered by banks and housing finance companies (HFCs) on new loans disbursed post-October 1, 2009 for a one-year period. The scheme will be applicable for all individual loans up to Rs 10 lakh for property priced upto Rs 20 lakh.

Finance minister Pranab Mukherjee had indicated in his budget speech for 2009-10 that such a scheme would be developed.
For the first time, the UPA government has come up with a direct interest subvention plan for the vast middle class borrowers. Earlier, in late-2008, banks started offering low-cost housing loans for loans upto Rs 20 lakh, on being prodded by the government. But no subvention was available for offering a lower interest.

It may be mentioned that economically weaker sections (EWS) and the low income group (LIG) used to get 5% interest subsidy for loans up to Rs 1 lakh.

"The latest subvention scheme is well crafted. It is expected to support the real estate sector, besides helping the home loan financiers like us to enhance our lending portfolio," said GIC Housing Finance vice president Rajib De.
Bankers are also happy. "The benefit will be passed on to borrowers upfront in the time of loan disbursement. So, the scheme will be easy to implement as well," a top official with a public sector bank said.

A home loan borrower may get a maximum of Rs 10,000 as interest subsidy for the first year only. At this juncture, there is no plan to extend the benefit for the second year.