In a move that can give a fillip to the housing sector, the government on November 9 more than tripled the maximum amount that a central government employee can borrow from the government to Rs 25 lakh, from Rs 7.50 lakh earlier.
Revising the house building advance (HBA) rules incorporating the accepted recommendations of the 7th Pay Commission, the government also increased the amount that a central government employee can borrow for expansion of their homes to 34 months of basic pay to a maximum of Rs 10 lakh, from Rs 1.80 lakh earlier.
Cost ceiling limit of the house which an employee can construct or purchase has been increased to Rs 1 crore, with a provision of upward revision of 25% in deserving cases, from Rs 30 lakh earlier.
“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. This will give a fillip to the housing infrastructure sector,” the government said in a press release.
Both spouses, if they are central government employees, are now eligible to take HBA either jointly, or separately. Earlier only one spouse was eligible for HBA.
The government has also fixed the rate of interest on HBA to 8.5%, in place of the earlier four slabs of interest rates ranging from 6% to 9.50% for loans ranging from Rs 50,000 to Rs 7.5 lakh. This rate will now be reviewed every three years. It has also withdrawn the proposal to for adding a higher rate of interest at 2.5% above the prescribed rate during sanction of HBA.
There is no change in the payment schedule. People can pay the principal first in the first 15 years, in 180 monthly installments, and interest thereafter in next five years in 60 monthly installments.
The house constructed or purchased with the help of HBA can be insured with the private insurance companies which are approved by the Insurance Regulatory Development Authority.
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