Union Budget 2012-13: Home loans may get cheaper

Home loans could get cheaper with the Budget proposing to undertake a number of measures to boost this sector. An insurance against defaults, additional refinance and an extension of interest subvention on low-cost homes are some of the measures that will drive home loans.

“The National Housing Bank (NHB) has been allowed to raise Rs 5,000 crore through tax free bonds. This is a positive for housing finance companies as the NHB provides us with refinance” said V K Sharma , CEO, LIC Housing Finance. “It is not clear whether housing finance firms would be eligible for external commercial borrowings, which have been allowed for low-cost housing but in either case it is a positive for the industry,” he added.

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Announcing the measures for housing, Pranab Mukherjee said the government would set up a Credit Guarantee Trust Fund to ensure better flow of institutional credit for housing loans. The NHB had proposed a Trust Fund which would enable lenders to provide loans to low-income groups, including those in the unorganized sector.

Besides this, the finance minister also extended the scheme whereby the government provides an interest subvention of 1% on housing loans up to Rs 15 lakh for purchase of homes with a value of up to Rs 25 lakh. While in the metros there are not many houses available for below Rs 25 lakh, banks said there was significant demand for loans under this scheme in smaller towns. It was widely expected that this scheme, part of the government’s stimulus package after the financial crisis, would be rolled back in this budget.