The subsidy will be available for loans up to Rs 10 lakh, provided the cost of the dwelling unit does not exceed Rs 20 lakhs, Minister of Information and Broadcasting Affairs Ambika Soni informed.
"It is expected that cut in interest rates should reduce Equated Monthly Installments (EMIs) of borrowers and create additional demand for housing, particularly in the low cost category", she said.
While the scheme would cost the exchequer Rs 1,000 crore this will benefit about 10 lakh borrowers. The move is also aimed at stimulating demand in the construction industry as well as industries such as steel and cement having employment and income multiplier effect, Soni added.
The scheme could prove beneficial to the loan borrowers in small cities but may not make any difference for the borrowers in metropolises like Delhi, Mumbai and Bangalore as the cost would exceed the threshold of Rs 20 lakh.