The Indian government is contemplating the allocation of 600 billion rupees (approximately $7.2 billion) for discounted loans aimed at small-scale urban housing over the next five years, as revealed by two undisclosed government sources to Reuters. Banks are expected to initiate this program in the coming months, coinciding with crucial state elections later this year and the general elections scheduled for mid-2024. In a previous month, the nation reduced cooking gas prices for households by around 18% as part of pre-election inflation management measures.
Prime Minister Modi’s Housing Subsidy Program for Low-Income Families Unveiled
Indian Prime Minister Narendra Modi introduced this initiative during an August speech commemorating Independence Day, although specific details had not been disclosed until now. The program will provide an annual interest subsidy ranging from 3% to 6.5% on loans 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, according to insider sources.
A government official explained, “The interest subvention will be deposited upfront into the housing loan accounts of beneficiaries. The program, slated to run until 2028, is nearing finalization and requires approval from the federal Cabinet.” The official added that the scale of subsidized credit will depend on the demand for such housing.
New Urban Housing Initiative in India to Aid Low-Income Families
As Prime Minister Modi highlighted 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.”
Given that the scheme is still being finalized, the officials have chosen 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 no specific lending targets have been outlined for lenders at present, discussions with government officials are expected to occur soon, according to two banking officials. They also noted that this move could potentially boost lending in the affordable housing segment of the home loan portfolio.
This initiative follows a previous government program that provided interest subsidies to lower-income urban borrowers, which ran from 2017 to 2022, resulting in the sanctioning of 12.27 million homes.
