HBA bonanza for central govt staff

Vinod Behl

As part of its multi- pronged policy at making homes affordable to masses and giving a push to low interest home loans, the central government has come up with a new policy initiative to benefit 50 lakh central government employees.

The new initiative under the House Building Advance (HBA) makes central government employees eligible for taking loans up to Rs 25 lakh, three times more than the earlier provision for constructing or purchasing a house. Not only that the amended HBA rules, incorporating the accepted recommendations of the Seventh Pay Commission, now have a provision under which both the spouses (if they are central government employees), can avail loan facility. Earlier only one spouse was eligible for loan. The cost ceiling limit of the house to be constructed/purchased by the employee, has been raised to one crore, more than 3 times the earlier limit of 30 lakh. The rules for house renovation/expansion have also been greatly liberalised, with a provision to borrow 10 lakh, almost 6 times more than the earlier eligibility of 1.8 lakh.The icing on the cake is that central government employees will be able to source advances under HBA at the rate 8.5 percent as against slab rates ranging from 6 to 9.5 percent for loans amounting to 50,000 to 7.5 lakh under earlier scheme.

The Centre’s new HBA policy comes on the heels of newly liberalised Employees Provident Fund(EPF) policy for its subscribers under which they can withdraw money from their EPF accounts to fund the purchase or construction of house or to buy land. Under the relaxed rules, 4 crore members of EPFO, were allowed to withdraw up to 90 per cent of their money from account or the cost of the property, whichever is less, for this purpose whereas earlier they were eligible for withdrawing money equivalent to 3 years of basic salary plus dearness allowance for purchase or construction of house/flat and two years of basic salary and dearness allowance for purchase of land. Those availing the loans under HBA scheme or EPF scheme for construction of house,  will get further benefited by the recent reduction in GST rates for building material. The GST rates of construction materials like marble and granite, ceramic tiles, glass, wires, cables, electrical boards/panels, paints, have been substantially brought down from 28 to 18 per cent, bringing down the cost of construction of house.

The loans under revised HBA scheme will result in a lot of saving for homebuyers, compared to availing loans from commercial entities like banks and HFCs. Deepak Kapoor, President, CREDAI, Western UP, says “ For someone needing to borrow Rs 25 lakh for a period of 20 years, at the prevailing rate of 8.35 per cent on compound interest, the total loan repayment at the end of this period will be over Rs 51 lakh. Whereas the same under HBA scheme @8.5 per cent  simple interest, would need a total repayment of just below Rs 41 lakh. This will result in a saving of over Rs 10 lakh”. Manoj Gaur, Vice President, CREDAI National and MD, Gaur group says that there is a double benefit under the revised HBA scheme. The families where both the spouses are central government employees, can now take double loan as the earlier provision of restricting benefits to only one person has been lifted. With prices already at a low point in NCR, this move is going to encourage a number of fence sitters to finalise deals.