To boost the housing sector, the Government is getting ready to implement the Budget announcement of one per cent interest subvention for housing loans up to Rs 15 lakh.

“The Cabinet is likely to discuss the proposal of interest subvention on July 3,” a senior Government official told Business Line .

There is, however, one condition for making use of the subvention – the cost of the house should not be more than Rs 25 lakh.

Earlier, this scheme was for housing loans up to Rs 10 lakh where cost of the house did not exceed Rs 20 lakh. The Government disbursed Rs 3,000 crore during 2011-12 for interest subvention.

Although banks do not keep data specific to loans up to Rs 15 lakh, the slab between Rs 10-25 lakh has the highest share in the total housing loan portfolio. However, despite this high share, non-performing assets in this slab are very low – the second lowest in all the five slabs.

Apart from the interest subsidy, the Finance Ministry also announced enhancing the limit of indirect finance under priority sector from Rs 5 lakh to Rs 10 lakh, besides setting up a Credit Guarantee Trust Fund to ensure better flow of institutional credit for housing loans.

This fund, established on May 1, covers loans up to Rs 5 lakh given by banks to economically weaker sections and low-income group housing.

Under priority sector lending, the housing loan limit for individuals has been raised to Rs 25 lakh from Rs 20 lakh for purchase or construction of a dwelling unit per family.

At the same time, provisions under rural housing fund have been increased to Rs 4,000 crore to provide finance to targeted groups in rural areas at competitive rates.

The housing sector has been facing poor fund flow as well as low demand, which has resulted in many projects getting delayed. The Government is hoping that these measures will have a multiplier effect on the housing as well as on manufacturing and job creation.

> Shishir.s@thehindu.co.in

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