In order to provide a significant boost to the housing sector, the government on Thursday made some incredible changes that have come as a surprise to all central government employees. It has more than tripled the amount such employees can borrow from the government. Yes, it is now INR 25 lacs, compared to a previous INR 7.50 lacs. The government also revised the Housing Building Advance (HBA) rules top keep in line with the recommendations of the 7th Pay Commission.
Now, central government employees can borrow a maximum of INR 10 lacs, as against earlier INR 1.80 lacs, for expansion of houses to 34 months of basic pay. Even the cost ceiling limit of a central government employee’s house that he wants to purchase or construct has been increased to INR 1 crore. For deserving cases, there is also a provision for upward revision of 25 percent. Earlier, this amount was only INR 30 lacs. The government mentioned in a press release that this will provide a significant boost to the housing infrastructure sector.
“People can now migrate from home loans taken from financial institutions and banks to HBA, if they so desire. This attractive package is expected to incentivize the government employee to buy house/ flat by taking the revised HBA along with other bank loans, if required,” the government mentioned.
With this new package, both spouses can now apply for HBA jointly or separately. Earlier, only one spouse was eligible. Any house purchased or constructed using HBA will be automatically eligible for insurance with private insurance companies. These companies must be approved by the Insurance Regulatory Development Authority (IRDA). According to ET Realty, employees have to “pay the principal first in the first 15 years, in 180 monthly instalments, and interest thereafter in next five years in 60 monthly instalments.”
The rate of interest on HBA will be reviewed every three years. This rate has been fixed to 8.5 percent as against an earlier four-slab structure, where the rate varied between 6-9.5 percent for loans ranging from INR 50,000-INR 750,000. The proposal to add 2.5 percent above the prescribed rate while sanctioning HBA has been withdrawn.