20,000 crore fund to provide last-mile funding for housing projects was announced by the Finance Minister With a focus on construction of unfinished units, Nirmala Sitharaman, finance minister announced special window to provide last mile funding for housing projects which are non-NPA and non-NCLT and are net worth positive in affordable and middle income category.
The government of India will contribute Rs 10,000 crore and roughly the same amount will be contributed by outside investors. The fund will be set-up as category-II AIF trust and would be professionally run with experts from housing and banking sector.
The objective behind the move is to focus on the construction of unfinished units. This is part of a package of measures announced by the government to boost the housing sector.
The central government on the lines of NIIF, can contribute to the fund while the rest of the investors would be LIC and other institutions and private capital from banks/sovereign funds/ DFIs, etc.
The finance minister also announced relaxation of external commercial borrowing (ECB) guidelines to facilitate financing of home buyers who are eligible under the Pradhan Mantri Awas Yojana (PMAY), in consultation with RBI. This is in addition to the existing norms of ECB for affordable housing.
Encouraging government servants to buy houses, Sitharaman announced lowering of interest rate on house building advance and linked with the 10-years government securities yields. House Building Advance is available to central government and state government employees for constructing a new house on the plot owned by the employee or jointly with the spouse. The scheme can also be availed for the purchase of new house or flat.
The government previously announced additional deduction up to Rs. 1.5 lakh for interest paid on loans borrowed up to 31st March, 2020 for purchase of house valued up to Rs. 45 lakh.
It has also established an organisation to provide credit enhancement for infrastructure and housing projects.
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