The Hindu Business Line : Assocham pitches for rural home loans at 6 pc interest

THE Associated Chambers of Commerce and Industry of India (Assocham) has called for a new National Housing and Habitat Policy aimed at promoting rural housing under Bharat Nirman Project with a minimum interest rate of six per cent and lock-in period of 30 years.

"Since international funds are normally available to the Government at about four per cent interest rate, there should be no harm if the housing finance companies are empowered to extend rural home loans at about six per cent interest rate for 30 years under the stipulations of new Habitat Policy.

"The aim of the new policy should be to provide every rural household of considerable income with a dwelling unit," an Assocham release said here.

In a note submitted to the Ministry of Urban Development and Chief Ministers of various States, the Assocham President, Mr Mahendra K. Sanghi, said that the existing number of housing finance companies which is restricted to 29 at present, should be more than doubled to ensure a wider disbursement of housing loans to rural populace under the regulatory mechanism of National Housing Bank (NHB).

The chamber's findings revealed that villagers have been more punctual in paying back the principal and interest amount disbursed to them by agencies for housing sector as compared to the repayment ratio in urban areas.

"Default rates for non-payment of housing credit, in the view of the chamber, stood at less than 2 per cent for rural areas in the past several years. However, the estimates for this in urban areas are much higher... exceeding more than 15 per cent," it said.

HFCs and other financial institutions hesitated to disburse rural credit for home loans under fear psychosis that the rural populace would not be regular in repayment of their loan schedules, Assocham said .

It suggested that since the rural economy had started acquiring focused attention of the policy makers, there should be liberal credit extension schemes for rural housing through HFCs with firm target.

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