Aimed at promoting low-cost housing, the government on Wednesday launched interest rate subsidy scheme that could help a home loan borrower save up to Rs 10,000 in EMIs, provided the cost of house is less than Rs 20 lakhs.

"The interest subvention scheme of 1 per cent (will apply) on all individual housing loans up to Rs 10 lakh for units costing up to Rs 20 lakh," an official release said.

The interest subsidy scheme to promote low-cost housing was announced by the Finance Minister Pranab Mukherjee in his reply to the debate on the budget for 2009-10 in Parliament in July.

Mukherjee had allocated Rs 1,000 crore for the interest subsidy scheme which will remain in operation for a year from October 1, 2009 to September 30, 2010.

Under the scheme, one per cent subsidy will be given on first 12 Equated Monthly Installments (EMIs) to be paid by the borrowers to the banks.

The scheme will cover all regions of the country and is expected to give a boost to credit flow to the housing sector and create additional employment in the housing and allied sectors, such as steel and cement, the release said.

The interest subsidy will be routed through the commercial banks and the housing finance companies registered with the National Housing Bank.

The allocation of Rs 1,000 crore and the guidelines of the scheme were approved by the Cabinet on September 10.2009.

An amount of Rs 300 crore will be allocated in the Budget of 2009-10 for implementation of the scheme while the balance amount will be allocated in the Budget next year.

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