Affordable Housing for All' is an important policy agenda of the Government of India. Accordingly The Cabinet Committee for Economic Affairs has approved an Interest Subsidy Scheme for Housing the Urban Poor in order to ameliorate the living conditions of Economically Weaker Section/LIG population in urban areas. Primary objective of the scheme is to provide interest subsidy support.
Objective:
The key objective of the scheme is to enable Economically Weaker Sections (EWS) and Low Income Group (LIG) households to avail affordable housing loans for purchase of house/construction of new house.
Definition:
a) EWS- Economically Weaker Sections are those households having monthly income upto Rs.3300/-
b) LIG- Low Income Groups are those households having monthly income between Rs.3301/- to Rs. 7300/-
Target Group:
Individuals /NGOs for on lending to their group members. Preference will be given to SCs, STs, Minorities, Person with disabilities and Women beneficiaries in accordance with their proportion in the total population of city/urban agglomerate during the 2001 census.
Applicants planning to form cooperative group housing societies or organizations like Employees Welfare Housing, Labour Housing, etc. should be given preference and whenever possible construction of houses by such cooperatives by way of 1+3 storied buildings should be promoted so that cost of land is shared among beneficiaries. However, this is not a mandatory requirement. Both individuals as well as group Housing borrowers are equally eligible under the scheme.
Target Borrower:
Identification of beneficiaries will be undertaken by Urban Local Bodies or Local Nodal Agencies and they will assist the borrowers in paper works and procedure of bank loan. However the borrower would be free to approach and negotiate a loan under the scheme directly with the bank branch.
Preference:
Preference will be given to Scheduled Caste, Scheduled Tribe, Minorities, Person with disabilities and Women beneficiaries in accordance with their proportion in the total population of the city/urban agglomerate during the 2001 census
Stipulations:
The ultimate beneficiaries should not own a house in his/her name or in the name of his/her spouse or any dependent child. But such beneficiaries should own land in his name in case of application for construction of new house.
Area of operation:
Urban area. Zonal Offices will be advised to submit us a list of branches at urban area for implementation of the scheme.
Nodal Agency:
NHB and HUDCO were selected by the Government of India to act as intermediary financial institutions that would be responsible for administering the subsidy. Before implementation the Bank has to sign a MOU with any of the two organizations. We have signed MOU with NHB.
Loan amount:
a) EWS- Maximum loan of Rs.1 lac ( Rs one Lac Only) for a house of at least 25 sq mts.
b) LIG- Maximum loan of Rs.1.60 lac( Rs one Lac sixty thousand Only) for a house of at least 40 sq mts. However subsidy will be available for loan upto Rs. 1 lac only.
Disbursement:
Disbursement will be made on a phased manner depending upon the progress of construction. Branch will monitor the construction of the dwelling units financed under the scheme, including the approvals for the building design, infrastructure facilities etc. as also the quality of the construction and verify through site visits etc. the expenditure incurred upto different stages of construction. In case of construction disbursement may be done by debiting the respective loan account and crediting the savings bank account of the borrower. However in case of purchase of a ready built house the payment should be made directly to the vendor by issuing Demand Draft/ Pay Order as the case may be by debiting the loan account of the borrower.
Rate of Interest:
Interest @8.50% p.a. for first 5 years with a provision to reset after 5 years from the date of drawal of first installment for all loan under the scheme.
Sanctioning Authority:
All the loan applications under the scheme will be processed and sanctioned at the Retail Processing Centres at Zonal Offices and in case there is no Retail Processing Centres at any Zonal Office, at the branches identified by the respective Zonal Office. On receipt of the sanctioned proposals the branch will disbursed the loan following all the stipulation noted by the Retail Processing Centres at Zonal Office/Processing Cell.
However before sanctioning any loan it should be ensured that the borrower have sufficient repaying capacity based on the average monthly income of the applicant for last three years and monthly family expenditure depending upon the size of family.
Pre-payment charges:
There will be no pre-payment charges for any loan sanctioned under the scheme.
Subsidy:
The subsidy will be 5% p.a. on interest charged on the admissible loan amount for both EWS and LIG, over the full period of the loan for construction or acquisition of a new house.
The Net Present Value (NPV) of the subsidy will be arrived at on the basis of notional discount rate of 9% p.a. (equivalent to Government Security rate) for the period of the loan and on the interest chargeable at the time the loan is contracted.
The subsidy will be credited upfront to the borrowers account and interest will be calculated on the net amount of loan at the agreed rate of interest.
Procedure for claiming Subsidy:
Participating branches will claim interest subsidy for the entire period of any loan disbursed during the quarter to Head Office, Priority Sector Department through their respective Zonal Offices.
Branches should submit their claim within 3 days of close of a quarter to their respective Zonal Offices and the Zonal Offices in turn will submit it to Head Office, Priority Sector Department within 7 days of close of a quarter.
Repayment:
Loan will be repaid in 180 to 240 EMI depending upon the income of the borrower. However branches may prefer for 20 years repayment, to get full benefits of Interest Subsidy and lower EMI.
