To significantly relieve its employees, the central government reduced the interest charged on housing construction loans by 80 basis points.
Central government employees are now eligible for advances on housing construction at an interest rate of 7.10 percent, instead of the previous rate of 7.90 percent.
This relief will apply to home loans taken out between April 1 of this year and March 31 of next year. The reduced interest rate on House Building Advance (HBA) would help central government employees to build their houses.
The Ministry of Housing and the City informed of the change in interest rates through an “Office Memorandum”, a kind of circular or order.
The advance on housing construction for central government employees remained at 7.90% for 18 months, from October 1, 2020 to March 31, 2022.
Under the HBA, central government employees can borrow an aggregate amount of up to 34 months of their basic salary subject to a maximum of Rs 25 lakh. This amount was set according to the recommendations of the 7th Remuneration Commission and the 2017 HBA rules.
Employees can benefit from this facility to repay bank loans contracted to build or buy a new apartment or a new house. They become eligible for the HBA from the day they obtain a loan from a bank or other financial institution.
All permanent central government employees are eligible for this facility. Even temporary employees who have served continuously for five years become eligible for this facility, provided they do not hold a permanent position under a state government.
If both spouses are central government employees and eligible for the HBA, the advance may be paid to them jointly or separately.
The HBA is a lucrative deal for central government employees as it comes with a simple interest rate. The principal amount must be repaid during the first 15 years in monthly installments. Interest is paid in monthly installments over the next five years.