India is contemplating allocating 600 billion rupees (equivalent to $7.2 billion) for the provision of discounted loans aimed at small-scale urban housing over the next five years, according to information from two undisclosed government sources disclosed to Reuters. Banks are anticipated to launch this initiative within the next few months, coinciding with crucial state elections later this year and the general elections scheduled for mid-2024. In the preceding month, the South Asian nation curtailed cooking gas prices for households by approximately 18% to manage inflation in advance of the elections.
Prime Minister Modi Unveils Housing Subsidy Program for Low-Income Families
Indian Prime Minister Narendra Modi unveiled this plan during an August speech commemorating Independence Day, though the particulars had not been previously disclosed. The program will extend an annual interest subsidy ranging from 3% to 6.5% on loans of up to 0.9 million rupees. These subsidized loans will be available for housing amounts below five million rupees with a repayment term of 20 years, as revealed by the sources.
According to one government official, “The interest subvention will be deposited upfront into the housing loan accounts of beneficiaries. The program, which is set to continue until 2028, is nearing finalization and necessitates approval from the federal Cabinet.” The official mentioned that the scale of subsidized credit will depend on the demand for such housing.
New Urban Housing Initiative in India Aims to Aid Low-Income Families
In the words of Prime Minister Modi in his August address, “We are planning to introduce a new initiative in the coming years that will benefit families residing in urban areas, especially those living in rented accommodations, slums, chawls, and unauthorized colonies.”
Due to the ongoing finalization of the scheme, the officials chose to remain anonymous. Reuters reached out to the Ministry of Housing and Urban Development and the Ministry of Finance for comments but received no response. While there are no specific lending targets outlined for lenders at present, discussions with government officials are expected to take place soon, according to two banking officials. They also noted that this move could potentially stimulate lending within the affordable housing segment of the home loan portfolio.
This initiative is not the first time the government has provided interest subsidies to lower-income urban borrowers; a similar program was in operation from 2017 to 2022, resulting in the sanctioning of 12.27 million homes. (Note: Exchange rate – $1 = 83.1360 Indian rupees).
