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Urban low-income housing may soon get a boost with the housing finance regulator, National Housing Bank (NHB), slashing refinance rates on loans up to Rs 5 lakh.
This would incentivise primary lending institutions such as banks and housing finance companies to lend more to low-income households — those not having income above Rs 15,000 a month — and also those in the informal sector.
The benefits of lower refinance rates are likely to be passed on to the ultimate borrowers in the low-income groups, who will now get longer tenure loans at lower fixed rates.
For housing loans up to Rs 2 lakh, NHB has slashed refinance rates from 10 per cent to 9 per cent. In the case of loans of Rs 2-5 lakh, the refinance rate has been cut to 9.25 per cent from 10 per cent.
The reduced rates would be provided under the recently launched dedicated special refinance scheme for urban low-income housing, R.V. Verma, Chairman and Managing Director of NHB, said.
“Low-income housing is a new thrust area for NHB. The reduced refinance rates are a good precursor to the mortgage guarantee trust fund, which will give default cover up to Rs 5 lakh,” he added.
In July-June 2011-12, as much as 35 per cent of the Rs 14,000 crore disbursed by NHB went towards housing loans up to Rs 5 lakh. The aspiration is to grow this to 40 per cent in the current year (July-June 2012), Verma said.
Long-term rate
He also said that NHB will now provide long-term fixed rate refinance — for up to 15 years.
This will help create a long-term fixed interest rate market for housing and benefit low and moderate income households who may not be able to absorb the volatility in interest rates under the floating rate regime.
The NHB chief also said that prepayment would also be possible under the new refinance scheme without attracting any prepayment levy.
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