Interest subsidy scheme for housing urban poor
The Ministry of Housing & Urban Poverty Alleviation has conceived an Interest Subsidy Scheme for Housing the Urban Poor (ISHUP) for providing interest subsidy on housing urban poor to make the housing affordable and within the repaying capacity of Economic Weaker Section/Lower Income Group.
The scheme encourages poor sections to avail of loan facilities through Commercial Banks/HUDCO for the purposes of construction of houses and avail 5% subsidy in interest payment for loans upto Rs1 lakh. The total interest subsidy requirements for the construction of 3.10 lakhs houses for EWS/LIG segments financed during the next 4 years (2008-12) is projected at Rs1100 crore.
The Scheme will leverage flow of institutional finance for the EWS and LIG segment households and result in creation of additional housing stock of 3.10 lakh houses for EWS/LIG segments over the next 4 years (2008-12) out of which 2.13 lakh dwelling units are targeted for EWS housing and 0.97 lakh for LIG housing. Households with monthly income of upto Rs3,300 are classified as EWS while those with monthly income between Rs3,300 and Rs7,300 are termed LIG.
Loans will be available for construction of new houses. Loan repayment periods will be permissible generally ranging between 15-20 years. The subsidy will be 5% p.a. for EWS and LIG, admissible for a maximum loan amount of Rs1 lakh over the full period of the loan.
Beneficiary borrowers may choose fixed or floating rates (the consequences clearly explained to the borrowers by PLIs). An additional 1% p.a. maximum will be permitted to be charged by banks/HFCs if fixed rate loans are extended which will be subject to reset after a minimum period of 5 years. Mortgage of the dwelling unit be accepted as primary security. However, there would be no collateral security/third party guarantee for loans upto and inclusive of Rs1 lakh excluding group guarantee. No levy of prepayment charges would be permitted.
Under the scheme, preference (subject to beneficiaries being from EWS/LIG segments) will be given to Scheduled Caste, Schedule Tribe, Minorities, Person with disabilities and women beneficiaries in accordance with their proportion in the total population of city/urban agglomerate during the 2001 census.
In order to disseminate the details of Scheme and clarify doubts, this Ministry has held two consultations with Housing Secretaries of States/UTs and representatives of Public Sector Banks (PSBs) in May this year. Banks/HFIs which have to act as the Primary Lending Institutions (PLIs) have responded well to the scheme and so far the following Banks/HFIs have signed Memorandum of Agreement (MOA) with the two Central Nodal Agencies (CNAs), namely National Housing Bank (NHB) & Housing & Urban Development Corporation Ltd. (HUDCO) who are to act as financial intermediaries for release of subsidy to PLIs under the Scheme.