Private Banks & housing finance companies might not get home loan subsidy

For home loan seekers it was good news when the Finance Minister announced banks will give interest subsidy of 1% on home loan. But it is not easy as it is looking, because the finance ministry will be putting some tough provisions for the housing finance companies and other private sector players.

Therefore it makes us think again before we breathe a sigh of relief on the statement given by Pranab Mukherjee that the government is subsidizing a 1% cut in home loan interest rates.

According to NDTV report complied on the information collected from the sources that not every one will be benefited from this subsidy. The finance ministry will probably put some condition for a large section of the lenders.

According to the information provided by the sources of the finance ministry the private Housing Finance Companies and banks whose interest rates are higher than public sector banks the government might not give subsidy to them. There seems to be of at least 2% of differential between the interest rate of public sector banks and private banks and housing finance companies. In this situation the government might have to give its subsidy to the lenders whose interest rates are low or it might restrict the interest rates for the home loan subsidy.

In his statement Finance Minister has said Rs 1000 crore subsidy will be offered to scheduled commercial banks and housing finance companies for a 1% cut in home loan interest rates for a period of one year.

Therefore, in case the government basis its decision on this course of action, then the private sector banks will not get this benefit.

However it’s too early to say something. Before finalizing anything a scheme should be discussed with the RBI, the National Housing Bank and finally the Cabinet will approve it.