Indian Government Extends Interest Subvention Scheme for Affordable Housing

Strategic Insights -

The Indian government has extended the interest subvention scheme on home loans up to Rs 1 million (US$21,701) by a year, aiming to boost demand for low-cost housing. Finance Minister Pranab Mukherjee announced the extension in the Budget speech, stating that the scheme will continue until March 2011. The government has also allocated Rs 7 billion for the scheme for the year 2010-11. Additionally, the Finance Minister has introduced a one-time interim relief to the housing and real estate sector, allowing builders to complete affordable housing projects in 5 years instead of 4 years to claim deductions on profit under section 80IB(10) of the Income Tax Act.

Key Takeaways:

  • The Indian government has extended the interest subvention scheme on home loans up to Rs 1 million by a year, until March 2011.
  • The scheme allows for a one percent interest subsidy on housing loans up to Rs 1 million where the cost of the house does not exceed Rs 2 million.
  • The government has allocated Rs 7 billion for the scheme for the year 2010-11.
  • The scheme will encourage developers to give more importance to projects costing up to Rs 2 million, according to Parsvnath Developers Chairman Pradeep Jain.
  • Unitech Managing Director Sanjay Chandra hails the extension of the interest subvention scheme as a move to maintain the momentum of demand for affordable houses.
  • The extension of the scheme will be available for housing projects approved on or after April 1, 2005.
  • The existing provision of section 80IB(10) allows for 100 percent deduction to developers building affordable housing projects, provided the project is sanctioned before March 31, 2008.

Statistics:

  • Rs 7 billion allocated for the interest subvention scheme for 2010-11
  • The scheme will apply to home loans up to Rs 1 million (US$21,701)
  • The interest subvention scheme will be extended until March 2011
  • The scheme will be available for housing projects approved on or after April 1, 2005
  • Section 80IB(10) allows for 100 percent deduction to developers building affordable housing projects, provided the project is sanctioned before March 31, 2008

Sources:

  • March 1 Asia Pulse
  • PTI report (no date mentioned)