In a significant relief to its employees, the central government has reduced the interest charged on house building loans by 80 basis points.
The central government employees can now avail of house building advances at an interest rate of 7.10 per cent, instead of the previous rate of 7.90 per cent.
This relief will be applicable on house loans taken between April 1 this year till March 31 next year. The reduced interest rate on House Building Advance (HBA) would help central government employees construct their homes.
The Ministry of Housing and Urban Affairs has informed about the change in interest rate through an “Office Memorandum”, a kind of circular or order.
The House Building Advance for central government employees remained at 7.90 per cent for 18 months – from October 1, 2020, to March 31, 2022.
Under the HBA, central government employees can borrow a total amount of up to 34 months of their basic pay subject to a maximum of Rs 25 lakh. This amount was set according to the recommendations of the 7th Pay Commission and the HBA 2017 rules.
The employees can avail of this facility for repaying bank loans taken to construct or purchase a new flat or house. They become eligible to avail of HBA from the day they obtain a loan from a bank or other financial institution.
All permanent employees of the central government are eligible to avail of this facility. Even the temporary employees who have served continuously for five years become eligible for this facility, provided they do not hold a permanent appointment under a state government.
If both the spouses are central government employees and are both eligible for HBA, the advance can be paid to both of them jointly or separately.
The HBA is a lucrative deal for central government employees because it comes at a simple interest rate. The principal amount is to be repaid in the first 15 years in monthly instalments. The interest is paid in monthly instalments over the next five years.