In a bid to prop up housing construction for the middle and lower middle-class, the government has extended the one per cent interest subvention scheme on housing loans of up to Rs.15 lakh by a year, provided the cost of the house does not exceed Rs.25 lakh.

The decision to extend the low-cost housing loan subsidy scheme through to fiscal year 2012-13 was taken by the Union Cabinet on Wednesday at its meeting chaired by Prime Minister Manmohan Singh. As per the approval, the subsidy limit for an individual borrower will be Rs.14,912 on a loan of Rs.15 lakh and Rs.9,925 on a loan of Rs.10 lakh. The interest subvention scheme will benefit all borrowers of housing loans in these categories which have been availed of during the current fiscal.

Briefing the media on the Cabinet approval here on Wednesday, Home Minister P. Chidambaram said: “When interest rates have risen, even one per cent relief is a relief for the middle-class and lower middle-class.’’ He pointed out that while a large number of people had already benefited from the one per cent interest subvention on housing loans, “who ever borrows now will get the benefit of one per cent”. The nodal agency for implementing the scheme for banks as well as housing finance companies is the National Housing Bank and a budgetary provision of Rs.400 crore has been made for the current financial year. While presenting the Budget for 2012-13, the then Finance Minister Pranab Mukherjee had proposed extension of the scheme by another year, keeping in view the shortage of affordable housing facilities for low-income categories in major towns and cities.

The original scheme of one per cent interest subvention on housing loans up to Rs.10 lakh, provided the cost of the housing unit does not exceed Rs.20 lakh, was approved by the Cabinet in September 2009. The scheme was subsequently liberalised in 2011-12.

More In: Economy | Business