The Indian government is set to launch a new interest subsidy program worth Rs 60,000 crore, aimed at benefiting both the urban poor and middle-class citizens. Sources reveal that the Ministry of Housing and Urban Affairs’ proposal has received approval from the Expenditure Finance Committee (EFC). This initiative, spanning five years, will provide interest subventions ranging from 3% to 6% per annum on home loans up to Rs 50,00,000.
The EFC, responsible for schemes with a budgetary allocation exceeding Rs 500 crore, has given its nod to this endeavor. It is anticipated that the carpet area requirements for eligible houses under this scheme will be notably higher compared to the existing Credit Linked Subsidy Scheme (CLSS) for urban poor beneficiaries, which falls under the Pradhan Mantri Awas Yojana-Urban (PMAY-U).
Under the current CLSS scheme of PMAY-U, the government offers interest subsidies of 6.5% for home loans up to Rs 6,00,000 for economically weaker sections (with a carpet area of 30-60 sqm), and 4% and 3% for loan amounts between Rs 6,00,000-12,00,000 and Rs 12,00,000-18,00,000, respectively, for those belonging to the MIG-I (160 sqm) and MIG-II (200 sqm) categories, for the purposes of house acquisition or construction. Since its launch in June 2015, PMAY-U has sanctioned 11.89 million houses, with the government disbursing Rs 1.47 trillion for the scheme.
This new scheme is expected to replace the CLSS scheme under PMAY-U and could provide a significant boost to the labor-intensive construction sector. The actual subsidy expenditure for the current fiscal year will depend on the demand from homebuyers. Importantly, the additional expenditure for this scheme will not impact the FY24 budget significantly, as the government has some room to accommodate such expenses within its Rs 10 trillion capex program.
