Making loans cheaper for poor: Govt set to expand eligibility cap to Rs 5 lakh for subvention scheme

Mumbai: In a move to make finance cheaper for weaker sections of the society, the government will soon be massively expanding the eligibility cap for the 5 per cent interest subvention scheme to Rs 5 lakh from the current Rs 1 lakh, a top official said today.

“The eligibility limit (for 5 per cent interest subvention) will be increased to Rs 5 lakh from the present Rs 1 lakh. The new scheme interest subsidy scheme will be announced soon,” Financial Services Secretary GS Sandhu said while addressing a realty summit organised by the industry body Nardeco here.

Earlier, addressing the same gathering, RBI deputy governor SS Mundra said housing shortage is very severe among the weaker sections, and pointed out to the findings of an RBI internal panel which say over 58 per cent of people from the economically weaker sections and over 39 percent from the low
income groups do not have access to housing.

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Under the subvention scheme, the government shares the interest burden on a loan for the particular target segment and such schemes exist of a slew of sectors, including agriculture.

Sandhu said the government has to ensure that financing is available at affordable prices and conceded that commercial banks have a limitation due to cost of funds.

“The banks cannot go below their cost of funds and to make credit cheaper, the government has to give the interest subsidy,” he explained.

Meanwhile, Sandhu also said the government will soon be coming out with a blueprint of its affordable housing policy.

“The leadership is very clear about its aim of having results in a time-bound manner. We are having deliberations on the scheme at present and will come out with an affordable housing policy soon,” he said.

He further said the Centre and the states, financial institutions, developers and local bodies are important stakeholders who will have to play their role in making the proposed initiative a success.

Mundra said there was a shortage of 18.7 million units in 2012, which is set to rise to 30 million by 2022, according to the RBI panel report.

Sandhu, however, said the banks’ ability to finance the requirement is constrained by a slew of factors and added that they need to look at alternatives like pension money, insurance companies etc participating in the sector.

Efforts like the “life-cycle financing” of projects under the 5/25 scheme are also aimed at the same direction, he said.

He added the move to liberalise the taxation regime for the REITs (real estate investment trusts) is a “game changer” for the sector and also welcomed it because smaller, retail investors will get an opportunity to participate in the sector.

With allegations of customers getting fleeced by realty players dominating the discourse, Sandhu asked the industry to adopt a code of conduct and adhere to it to ensure transparency.

Sandhu, a civil services officer from the Rajasthan cadre, said the states have an important part to play on the real estate front and efforts should be made to reduce costs of houses through some relief on the taxation front.

They should also give early clearances to projects, which also reduces the possibilities of cost escalations, he said.

On the issues facing land acquisition, Sandhu said the government and private parties have to work together, wherein the former makes the required land available and the latter develops it as per laid down standards.

PTI