The Expenditure Finance Committee (EFC) has approved a new Rs 60,000 crore interest subsidy scheme proposed by the Ministry of Housing and Urban Affairs. The scheme, spanning five years, aims to provide interest subvention of 3-6% per annum on home loans up to Rs 50,00,000 for the urban poor and middle class. The proposed scheme is expected to replace the existing Credit Linked Subsidy Scheme (CLSS) under the Pradhan Mantri Awas Yojana-Urban (PMAY-U), potentially boosting the construction sector. The approval aligns with the government's push for affordable housing, with potential positive impacts on economic growth and the real estate industry.
The Expenditure Finance Committee (EFC) has greenlit a monumental Rs 60,000 crore urban housing subsidy scheme proposed by the Ministry of Housing and Urban Affairs, signalling a major initiative by the government to address housing concerns for the urban poor and middle class. This ambitious scheme, set to span five years, is designed to provide substantial interest subvention of 3-6% per annum on home loans up to Rs 50,00,000.
With the EFC's stamp of approval, the scheme is now poised for Cabinet consideration. The EFC, chaired by the expenditure secretary, plays a pivotal role in approving schemes where the budgetary allocation exceeds Rs 500 crore. The imminent rollout of this housing subsidy scheme underscores the government's commitment to enhancing housing affordability and accessibility for a significant section of the population.
A notable feature of the proposed scheme is the anticipation of a higher carpet area eligibility compared to the existing Credit Linked Subsidy Scheme (CLSS) under the Pradhan Mantri Awas Yojana-Urban (PMAY-U). The CLSS scheme currently extends an interest subsidy of 6.5% for home loans up to Rs 6,00,000 for economically weaker sections, with varying percentages for different loan amounts and beneficiary categories.
The proposed scheme's potential to replace the CLSS scheme could mark a strategic shift, aiming to inject momentum into the labour-intensive construction sector. By offering attractive interest subventions, the government aims not only to stimulate housing demand but also to bolster economic activity in construction.
As of the current date, the PMAY-U has made significant strides, sanctioning 11.89 million houses since its inception in June 2015. The substantial financial commitment, with Rs 1.47 trillion released for the scheme, underscores the government's dedication to addressing the housing deficit.
While the actual expenditure on subsidies in the current fiscal year will hinge on the uptake by homebuyers, it is expected to inject vitality into the real estate sector. Importantly, the additional financial outlay for the scheme is unlikely to impact the FY24 Budget significantly, given the government's fiscal headroom within its Rs 10 trillion capex program.
Beyond the housing subsidy scheme, potential savings are anticipated from the Centre's Rs 1.3 trillion capex loan facility for states in FY24, particularly due to some states not meeting conditionalities. Additionally, there is scope for savings under centrally sponsored schemes, contributing to a strategic allocation of resources.
In essence, the proposed Rs 60,000 crore housing subsidy scheme represents a transformative step toward housing inclusivity, poised to reshape the urban landscape. If implemented effectively, this initiative could be a catalyst for economic growth, job creation, and improved living conditions for millions of citizens. As the government moves closer to Cabinet approval, the scheme holds the promise of unlocking new opportunities for both the housing and construction sectors in India.
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