For urban poor, Govt plans to stand guarantee for Rs 5-lakh home loans
The Government is finalising the blueprint for a scheme to enable a vast majority of the urban poor to own a house.
The housing and urban poverty alleviation (HUPA) ministry has proposed to stand in as guarantor for home loans up to Rs 5 lakh. Under the scheme, banks would be reimbursed up to 90 per cent in case the poor default on these loans.
The scheme, targeting those earning less than Rs 10,000 per month in cities, envisages setting up of a credit guarantee fund which will re-imburse banks in case of default. "The move will enable security guards, drivers and domestic servants to own a house," a senior HUPA official told The Indian Express.
The ministry's surveys have found that the average cost of owning a house in metros like Delhi, Mumbai, Kolkata, Bangalore and Chennai works out to Rs 5 lakh, going up to Rs 7 lakh.
According to the proposed scheme, the government will re-imburse 90 per cent of the loan amount for loans up to Rs 2 lakh and 85 per cent in case of loans between Rs 2 lakh and Rs 5 lakh. "Banks are reluctant to extend credit to the economically weaker section (EWS) and low-income group (LIG). To allay their fears, the government will step in as the guarantor," said the official.
Besides the EWS and LIG criteria for eligibility, the size of the house has to match government specifications. For EWS applicants, loans will be extended for a house with a minimum area of 25 sq m and for those in the LIG category, at least 40 sq m as house area is the minimum eligibility.