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Home Loans Made Cheaper To Make Housing Affordable For All By 2022

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Prime Minister Narendra Modi recently launched the Housing for All By 2022 scheme in India. The mission is aimed at providing affordable houses for Economically Weaker Section (EWS) and Lower Income Groups (LIG). In order to make this mission successful, the government has decided to reduce home loan rates for people falling under EWS and LIG categories.

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Interest Subvention Rate

Subvention is money granted by the government. Interest subvention is the subsidy offered by the government on interest rates. It is offered by the government to promote a particular industry.

For example, if you have borrowed a home loan, then a certain part of the loan’s interest charges will be paid by the government and you will have to pay the remaining amount. This is a great way to make different business ventures like agriculture, education, handlooms, export-oriented sectors, and housing sectors feasible for common people.

Proposal for Increasing Interest Subvention Rate

Recently, the Cabinet Committee on Economic Affairs led by Prime Minister Narendra Modi gave the green signal to a proposal that increases interest subvention rate for affordable housing via credit-linked subsidy scheme. The committee accepted suggestions presented by an inter-ministerial committee to increase the interest rate to 6.5 percent for loans amounting up to Rs.6 lakh for people belonging to EWS and LIG.

The rate that home loans will be given is 10.50 percent. Of this 6.5 percent of interest charges will be paid by the government. The borrower only has to take responsibility for paying the remaining 4 percent. A statement issued by the ministry Urban Development said that under this new initiative, the urban poor will be benefited by an amount of Rs.2.30 lakh each. According to, a whopping amount of INR 14,000 billion has been allotted for this project.

This proposal was initially presented in the month of February this year. The Union Cabinet at that time suggested that the interest subsidy rate for housing loans be capped at 4.98 percent for EWG and 3.33 percent for LIG. However, this proposal was rejected by the cabinet members who were in favour of a further hike in interest subsidy.

Housing for All by 2022 Scheme

The government of India has launched the Housing for All By 2022 scheme keeping in mind certain targets. These are as follows:

  • Land will be used as a resource by private developers to rehabilitate the living conditions of slum dwellers. For slum rehabilitation, an amount of Rs 1 lakh per house will be provided by the central government for developing houses for slum dwellers.
  • Encouraging economically weaker sections of the society to opt for affordable housing under credit-linked subsidy scheme.
  • Partnership of private and public enterprises to develop affordable houses.
  • Subsidy for individuals opting to construct or enhance their house.

Cheap Home Loans

The scheme is going to take off in 4,041 towns and cities of India. The primary focus would be on 500 cities and towns with a population of 1 lakh and above, each. This would account for 75 percent of the total urban population. The project will be carried out in three phases from the current fiscal year to 2022. However, the increased interest subvention rate through credit-linked subsidy scheme will be applicable from 2015.

The number of houses developed under this scheme would depend on the demand by individuals in different states and union territories. Many private developers have formed a partnership with the government to deliver housing projects under this scheme. On completion of this project, people from different sections of the society will have a home of their own.

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