//Cheaper homes for urban poor?

Cheaper homes for urban poor?

Mahendra Kumar Singh,  17 Dec, 2006 TIMES NEWS NETWORK

NEW DELHI: A monthly income of Rs 11,000 may not take you far in these inflation-charged times but, it could still give you the satisfaction of belonging to the high-income group if the union housing ministry has its way.

The ministry has proposed recalibrating the income limits to define various economic groups. According to the new classification, households with a monthly income of less than Rs 3,200 will fall in the economically weaker section (EWS) category. The earlier limit was Rs 2,500.

Those with income between Rs 3,200 and Rs 7,000 a month will fall in the LIG category (earlier limit Rs 2,500-Rs 5,400) while a monthly income between Rs 7,000 and Rs 11,000 would put households in the MIG category (earlier limit Rs 5,400-Rs 9,920). Incomes above that would put households in the HIG bracket (earlier limit above Rs 9,920).

At the heart of this re-classification is the government's desire to provide affordable housing to the millions of urban poor without a home of their own. To turn this into reality, the government plans to offer housing loans at low interest rates to those with an annual income of less than Rs 1 lakh. Under the new categorisation, all EWS and LIG families would be eligible for such loans.

The ministry, while acknowledging that no bank offers home loans to EWS and LIG households and the prevailing interest rates were in any case out of reach of the poor, proposes to give an interest subsidy of 5-6% on home loans for these sections.

According to government estimates, the scheme will cost around Rs 15,000 crore during the 11th Plan period and it will be implemented through nationalised banks across the country. "The proposal, if it gets the finance ministry's approval, will benefit some 39 million poor families living in slums in cities around the country," a senior ministry official said. Out of the total housing shortage of 24.71 million expected at the beginning of next year, 17.9 million will be in the EWS category, followed by 6.29 million in LIG category. For the MIG class, shortage will be 0.45 million while the HIG category has zero requirement.

At the start of the new year, the government estimates that there will be 66.30 million households in the country. Of this, 13.79 million households will fall in the EWS category, 30.37 million in LIG, 14.34 million in MIG and 07.80 million in the HIG category.

According to the existing income classification, 12 million households will fall in EWS category, 27 million in LIG, 16.64 million in MIG and 11.20 million in HIG. The proposal to extend interest subsidy to EWS and LIG sections was moved considering that the saving ratio for EWS category was 0% and for LIG just 8.90%. The saving ratio for MIG section was 17.14% and for HIG 73.91% and above.