Indian Government Planning Rs 60,000 Crore Subsidised Housing Loan Scheme For Borrowers

India is contemplating spending Rs 60,000 crore ($7.2 billion) to provide subsidised loans for small urban housing over the next five years, according to Reuters report.

The banks are expected to introduce this scheme in the next couple of months, ahead of key state elections later this year and general elections due in mid-2024.  

The plan for subsidised loans was announced by Prime Minister Narendra Modi, during his Independence Day speech, but the specific details had not been previously reported.

The Prime Minister had stated, "We are coming up with a new scheme in the coming years that will benefit those families that live in cities but are living in rented houses, or slums, or chawls and unauthorised colonies,"

As per the report, the government official stated that the scheme for beneficiaries is nearing finalisation and will need approval from the federal Cabinet.

According to the official, the scheme has the potential to benefit 2.5 million loan applicants from low-income groups in urban areas. However, the amount of subsidised credit provided will depend on the demand for affordable housing.

Under this scheme, housing loans below Rs 50 Lakh with a tenure of 20 years will be eligible. It will offer an annual interest subsidy ranging from 3 per cent to 6.5 per cent on up to Rs 9 Lakh of the loan amount.

Lenders have not been given any specific lending targets, but they expect to have a meeting with government officials soon, according to two bank officials. In anticipation of the meeting, banks have already started identifying potential beneficiaries.

This proactive approach could potentially lead to an increase in lending for affordable housing within the home loan portfolio.

The government has previously implemented interest subsidies for lower-income borrowers in urban areas. From 2017 to 2022, a similar scheme resulted in the sanctioning of 12.27 million homes.