In the era of Home loans at a rate of 11.5% to 12% ministry of housing and poverty alleviation has proposed that the urban poor be given home loans at around 5% interest. Government is now concentrating in the urban poor society of India. As the current interest rates of 11.5% to 12% on home loans is making it impossible for urban poors to get loans.

Other steps the ministry is exploring for the urban poor are: encouraging big companies to build houses for their employees, reserving 15-25% of land, revamping master plans to provide inclusive zoning (housing for the urban poor), using the floor space index (FSI) as a resource, co-operative housing, restructuring of rent control Acts and providing a shelter fund.

For home loans to the poor, the ministry has suggested that the government offer an interest subsidy scheme to banks (both public and private) either through the National Housing Bank (NHB) or Housing and Urban Development Corporation (Hudco). About 5 million houses may be funded this way.

The ministry feels, if high-income individuals take loans of Rs 2 lakh, they get an annual income tax benefit of up to Rs 13,500. The objective of the interest subsidy scheme is to ensure that the economically weaker section that does not pay tax also gets access to subsidy by way of lower interest.

“The real estate boom at the moment is targeting only the upwardly mobile class. That is all very good, but the needs of the urban poor also have to be taken into consideration. Our cities cannot flourish just on the basis of a miniscule section of society,” Kumari Selja, minister of state for housing and poverty alleviation, said in an interview to FE.

The urban poor can also opt for micro-finance or approach banks collectively, as has been done in Kerala where people got loans at 7% interest rate. However, the ministry feels the interest subsidy scheme will help them get the best rate on loans – of about 5%.

So government is making it possible for Indian urban poors to grab a pie of Real Estate. Will they Succeed?
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