Restoration of Interest Subvention Scheme to encourage housing demand

NITI Aayog has recently suggested to reinstate the interest subvention scheme that would boost the housing demand. This recommendation would help to revive the consumer sentiment. The scheme is offered by the realty developers to their potential buyers through tie-ups with banks. It tries to support the homebuyers by letting them book a property by paying 5% to 20% of the whole amount. The EMIs are paid by the developer on behalf of the buyer till the time period mentioned on a specific contract. The financial assistance to homebuyers and other such provisions will make progress for reviving demand in the real estate sector.

The scheme will give relief to buyers from EMI burden till the possession. The delay in possession, exorbitant EMIs and interest on home loans and rent on properties are among the major challenges faced by consumers. A subvention scheme would lead to a stress-free passage to homeownership by easing the interest pressure till possession. The scheme would motivate the realty developers to deliver possession within the promised time so that they could be relieved from paying the loan interest on homebuyers’ behalf.

Additionally, liquidity would also be enhanced at the developers’ end, as they would get access to funds at current rates of home loans which are competitive. With RERA in place, frequent checks are done by relevant authorities via escrow account system, so that the funds are spent on projects and related activities only.

The COVID-19 pandemic has adversely impacted the economy worldwide. The Indian government has taken numerous steps to keep the economy afloat during the lockdown period. The 20-lakh crore economic package led to the recovery of various sectors.

Further, infusion of Rs 30,000 crore special liquidity scheme and Rs 45,000 crore partial credit guarantee scheme for Non-Banking Finance Companies, including Home Finance Companies, is expected to stimulate cash flows into the sector.

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