Even as rising home loan rates increase the cost of buying a house, the economically weaker sections (EWS) and lower income groups (LIG) can look forward to some relief in the form of a subsidy on interest rates.

The ministry of housing and urban poverty alleviation, which is targeting affordable housing for all, is working on an interest subsidy scheme that will give a 5 percentage point subsidy on housing loans to EWS and LIG.

This means that if the market rate of interest is 11 per cent, a person availing the subsidy will get the loan at 6 per cent. Households which will be able to avail this subsidy are EWS, defined as those with a monthly household income less than or equal to Rs 3,300 per month, and LIG for whom this limit is Rs 7,300 per month.

The proposed scheme will be valid for five years and will be introduced in 5-6 months. According to the current proposal, the subsidy will be on loan amounts of Rs 80,000 to 1.5 lakh and will be implemented through public and private sector banks.

There is a shortage of 24.7 million housing units in the country. A survey by the ministry reveals that 99 per cent of the shortage is in EWS and LIG segments and, hence, it is working towards addressing this shortage. “Finance is an important tool for enhancing affordability. Hence this subsidy,” an official with the ministry of housing said. “There are several government projects for slum dwellers. Under Section 80C, income tax payers can also claim a tax benefit of up to Rs 1 lakh paid towards the principal component of home loans. The new scheme is targeted towards the LIG and EWS, which do not get these benefits,” he added.

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