On 14 September 2019, the Finance Minister Nirmala Sitharaman proclaimed a number of measures to improve the current situation of the housing sector. The suggested measures include lower interest rates on house-building advance for government employees.
Such a suggestion is backed up by the fact that government employees form the major component of demand for housing. It encourages them to buy more new houses said the Finance Minister. The interest rate on house-building advance for government employees will soon be lowered and tied up with 10-year G-Sec yields.
In addition, the government announced special funding for non-NPA and non-NCLT housing projects that are affordable for middle-income groups. The main objective of this initiative is the construction of unfinished housing units.
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A funding window of Rs.20,000 crore is planned by the government; an equal share will be contributed by outside investors (from housing and banking sector) as well.
The programme will be implemented under the National Investment and Infrastructure Fund (NIIF). NIIF was launched in 2016 as a tool to fund commercially viable brownfield, greenfield, and stalled projects.
A relaxation of external commercial borrowing (ECB) guidelines for lending institutions was also announced by the government. The relaxation applies for financing home buyers under the Pradhan Mantri Awas Yojana (PMAY) scheme.
The measures announced are in line with the additional income tax deduction for interest paid on home loans borrowed up to 31 March 2020. The additional deduction applies to the purchase of a house valued up to Rs.45 lakh and was announced during the Budget 2019.
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