House Building Advance – How to calculate the interest for HBAHouse Building Advance to Central Government Employees 1.The Scheme of House Building Advance to Central Government Employees is aimed at providing assistance to the Government employees to construct/acquire house/flats of their own. The scheme was introduced in 1956, as a welfare measure. Ministry of Urban Development & Poverty Alleviation act as the nodal Ministry for the same. 2. House Building Advance is admissible to all those temporary employees also who have rendered 10 years of continuous service. The Ministries/Departments are delegated powers to sanction House Building Advance to their employees in accordance with the House Building Advance Rules. 3.With effect from 27-11-2008, the following provisions of grant of House Building Advance shall be in operation, until further orders:- (i).The maximum limit for grant of HBA shall be 34 months’ of pay in the pay band subject to a maximum of Rs. 7.50 lakh or cost of the house or the repaying capacity whichever is the least, for new construction/purchase of new house/flat. (ii).The maximum limit for grant of HBA for enlargement of existing house shall be 34 months’ pay in the pay band subject to a maximum of Rs. 1.80 lakh or cost of the enlargement or repaying capacity, whichever is the least. (iii).The cost ceiling limit shall be 134 times the pay in the pay band subject to a minimum of Rs.7.50 lakh and a maximum of Rs.30 lakh relaxable up to a maximum of 25% of the revised maximum cost ceiling of Rs.30 lakh. 4. The rate of interest on House Building Advance is between 5% to 9.5% ,depending on the loan amount. 5. The repaying capacity of Govt. servants who have more than 20 years of remaining service has been revised from 35% to 40% of pay. (Pay means pay in the pay band). 6. The salient features of House Building Advance Rules are as follows- 1. ELIGIBILITY
If both the husband and wife are Government of India employees and eligible for HBA, it shall be admissible to only one of them. 2. PURPOSE HBA is granted for:
* Private party means registered builders but not private individuals. 3. CONDITIONS: a) The applicant or spouse or minor child should not already own a house in the town/Urban agglomeration where the house is proposed to be constructed or acquired. b) The title to the land should be clear. The land may be owned either:- by the Government employee; or – jointly by the Government employee and spouse. c) COST CEILING 134 times of pay in the pay band subject to a minimum of Rs. 7.50 lakh and a maximum of Rs.30 lakh Administrative Ministry may relax the cost ceiling to 25% of cost ceiling mentioned above in the individual cases on merits. (Effective from 27th November, 2008) d) AMOUNT OF ADVANCE:
(i) 34 times the pay in the pay band. (ii) The cost of construction.** (iii) Rs. 7,50,000/- *** (iv) Repaying Capacity. ** 80% of cost in rural areas. *** Rs. 1,80,000/- in case of enlargement of existing house. e) REPAYING CAPACITY:- Repaying Capacity is computed on the following basis:-
@ Pay means pay in the pay band 4. DISBURSEMENT OF ADVANCE:
5. TIME SCHEDULE FOR UTILISATION OF HBA:
6. REPAYMENT OF ADVANCE: The recovery of advance shall be made in not more than 180 monthly installment and interest shall be recovered thereafter in not more than 60 monthly installments. In case Government servant is retiring before 20 years, repayment may be made in convenient installments and balance may be paid out of Retirement Gratuity. 7. INTEREST The rate of interest on Housing Building Advance with effect from 1st April, 2003 are as follows:-
8.COMMENCEMENT OF RECOVERY:
COMMENCEMENT OF RECOVERY(CONT’D):
* The sanctions of HBA should invariable stipulate a higher rate of interest at 2.5% above prescribed rates with the stipulation that if conditions attached to the sanction are fulfilled, rebate of interest to the extent of 2.5% will be allowed. 9. CREATION OF SECOND MORTGAGE: The Government servants who have obtained HBA from the Government may be permitted to create a second charge on the property provided they obtain prior permission of the Head of the Department and the draft deed of second mortgage is submitted to the Head of the Department for scrutiny. Such a second charge may be created only in respect of loans to be granted for meeting the balance cost of houses/flats by recognised financial institutions. 10.PROVISIONS FOR SAFE RECOVERY OF HOUSE BUILDING ADVANCE: (i). As a safeguard of the House Building advance, the loanee Government employee has to insure the house immediately on completion or purchase of the house, as the case may be, at his own cost with Life Insurance Corporation of India and its associated units. The house/flat constructed/purchased with the help of House Building advance can also be insured with the private insurance companies which are approved by Insurance Regulatory Development Authority(IRDA). However, the insurance should be taken for a sum not less than the amount of advance against damage by fire, flood and lightning, and has to be continued till the advance together with interest is fully repaid to Government. (ii).The house constructed/purchased with the help of House Building Advance has also be mortgaged in favour of the President of India within a stipulated time unless an extension of time is granted by the concerned Head of the Department. After completion of the recovery of the advance together with interest thereon, the mortgage deed is re-conveyed in a proper manner. Here we have given an example, how to calculate the interest amount for House Building Advance. An employee has drawn House Building Advance as two installments of Rs.163750. His first installment given on October 98 and the second installment on July 99. He started to repay from November 99 with monthly Rs.1500. Here we calculate the interest amount for the employee has to pay…
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