Will setting up of DICGC help reduce home loan interest rate?
Talks for setting up a credit guarantee fund are doing the rounds. In order to promote low-cost housing, the Finance Ministry and Reserve Bank of India are planning for this fund, which is most likely to come under the purview of the Deposit Insurance and Credit Guarantee Corporation (DICGC). This is expected to bring down the interest rate on home loans.
A recent poll conducted by CommonFloor.com revealed that nearly 33 per cent of home buyers want ‘reduction in home loan interest rate’ to be the top priority for Modi Government amongst its stated goals.
With just a few weeks to go for the Modi government’s maiden budget, now all hopes are pinned on it as it is expected to be ‘growth-oriented’, at least as told by Finance Secretary.
So, will it actually bring down the interest rate on home loans? And above all, will the talks turn into a reality? Well, while the answer to these seems unclear right now, we present you the budget highlights for the last three years to see what came into real estate’s bag.
2011-2012
The union budget of 2011-12 focused a lot on low-cost and affordable housing. The aforementioned initiatives were likely to encourage the developers to build more and more affordable housing projects. Further, reduced rate of custom duty on raw materials of cement industry was also a positive measure to promote affordable housing.
2012-2013
The union budget of 2012-13 also focused quite a lot on low-cost and affordable housing. External borrowings was a good move. Further, enhanced rate of 150 per cent as opposed to 100 per cent for capital expenditure incurred in affordable housing was also widely celebrated.
2013-2014
Though there were incentives for first time home buyers, but it came with a catch. An additional deduction of up to Rs 1 lakh on interest was announced for the first time home buyers, but property should not cost more than Rs 40 lakh. It proved a lucrative offer only for buyers in Tier II and III cities, and not for metro cities as getting a property within Rs 40 lakh is like a distant dream in Tier I cities, unless one move to the suburbs. Setting up of an Urban Housing Fund was indeed a positive move for addressing the housing shortage.
So, did all these measures to boost affordable housing had any positive implications on the sector? Well, the answer to this question is shrouded in ambiguity as India’s housing shortage still stands at about 20 million in urban India and about 45 million in rural India!
