Central govt employees can now take advance up to Rs 25 lakh for new home

Central government employees can now take advance up to Rs 25 lakh for construction or purchase of a house at a simple interest rate of 8.5%, a move aimed at giving a fillip to the housing sector.

Earlier, the maximum borrowing limit was Rs 7.5 lakh with interest rate slabs ranging from 6% to 9.5%.

A senior official in the Ministry of Housing and Urban Affairs said that around Rs 11 lakh could be saved by availing "House Building Advance (HBA)" as compared to borrowing from lending institutions on a Rs 25-lakh loan for 20-years period.

He explained that if a loan of Rs 25 lakh is taken for 20 years at the prevailing rate 8.35% (compound interest) from banks like the SBI, the monthly instalment comes to Rs 21,459.

"The total amount to be paid at the end of 20 years comes to around Rs 51.50 lakh, including interest component of Rs 26.50 lakh," he added.

However, if the same amount is borrowed under the HBA at 8.5% (simple interest) for 20 years, the monthly instalment comes to Rs 13,890 for first 15 years and Rs 26,411 per month for the remaining period, he said.

"The total money that has to be paid comes to around Rs 40.84 lakh, including interest component of Rs 15.84 lakh."

The ministry makes rules for HBA for central government employees from time to time.

"Employee can borrow upto 34 months of the basic pay subject to a maximum of Rs 25 lakhs, or cost of the house/flat, or the amount according to repaying capacity, whichever is the least for new construction/purchase of new house/flat," the release said, quoting the revised HBA rules.

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 such facility.