Interest Rate cut on House Building Advance to Spur Housing Demand

The central government's recent move to reduce by one percent interest rate on house building advance for its employees during the festive season may well prove to be a booster for home sales during the auspicious months.

According to the Union Housing and Urban Affairs Ministry, the interest rate on house building advance has been cut from 8.5% to 7.9% for government employees. The new rate according to ministry notification,comes into effect from October 1, 2019. This will be applicable for a period of one year, irrespective of the loan amount of house building advance(HBA).  The HBA is admissible to permanent employees and all those temporary employees who have rendered five years of continuous service.

At a time when RBI has already cut its REPO rate by 25 bps in its latest policy stance, substantial interest rate cut on house building advance to government employees at the beginning of festive season is a positive development. It will boost up housing (especially affordable housing) since government employees form a major chunk who avail loan for housing construction as well as for buying home.