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House Building Advance – How to calculate the interest for HBA

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House 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
  • Permanent Government employees.
  • Temporary Government employees who have rendered at least 10 years continuous service.
  • To be granted once during the entire service.
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:
  1. Constructing a new house on the plot owned by the official or the Official and the Official’s wife/husband jointly.
  2. Purchasing a plot and constructing a house thereon.
  3. Purchasing a plot under Co-operative Schemes and Constructing a house thereon or acquiring house through membership of Co-operative Group Housing Scheme.
  4. Purchasing /construction of house under the Self-Financing scheme of Delhi, Bangalore, U.P., Lucknow etc.
  5. Outright purchase of new ready-built house/flat Housing boards, Development Authorities and other statutory or semi-Government bodies and also from private parties.*
  6. Enlarging living accommodation in an existing house owned by the official or jointly with his/her wife/husband. The total cost of the existing structure (excluding cost of land) and the proposed additions should not exceed the prescribed cost ceiling.
  7. Repayment of loan or advance taken from a Government or HUDCO or Private source even if the construction has already Commenced, subject to certain conditions.
  8. Constructing the residential portion only of the building on a Plot which is earmarked as a shop-cum-residential plot in a Residential colony.
* 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:
  • will be the LEAST of the following:-
(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:-
S. No.
Length of remaining service of the applicant.
Repaying Capacity
1.
Retiring after 20 years.
40% of pay @
2.
Retiring after 10 years but not later than 20 years.
40% of pay @ plus 65% of * Retirement Gratuity
3.
Retiring within 10 years
50% of pay @ plus 75% of * Retirement Gratuity.

@ Pay means pay in the pay band

 
4. DISBURSEMENT OF ADVANCE:
S. No.
Purpose of HBA
Disbursement
(1)
(2)
(3)
(i)
For construction/enlargement (single or double storeyed).
50% –

50%

on execution of mortgage deed

on construction reaching plinth level (Ground Floor).

(ii)
For purchase of land and construction (Single storeyed)
40% or –
actual cost

30% –


30% –
for purchase of plot on execution of agreement and production of Surety Bond.

On execution of Mortgage deed.

On construction reaching plinth level.  
(iii)
For purchase of land and construction (Double storeyed)
35% or actual cost

32.5% –


32.5% –
for purchase of plot on execution of agreement and production of Surety bond.

On execution of the mortgage deed.

On construction reaching the plinth level.  
(iv)
For purchase of ready built house/flat
100% – in one lumpsum.
(v)
For acquiring flat/house from Co-operative Group Housing Society.

20% –

80% –

Towards purchase of land by the Society.
in suitable installments on receipt of demand (pro-rate basis)
(vi)
For purchase of flat under SFS of Development Authorities etc.
 
No payment for initial registration Deposit.
May be released in not more than 5 instalments. But the fifth and final instalment should not be less than 10% and is to be released for making final payment.
 
5. TIME SCHEDULE FOR UTILISATION OF HBA:
S. No.

Purpose
Time limit
(a)
Purchase of registered plot on which construction can commence immediately.

Sale deed to be produced within 2 months.
(b)
Purchase of ready built house.
Acquisition and mortgage to Government to be completed within 3 months.

(c)
Purchase/construction of new flat
Should be utilised within one month of sanction.
 
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:-
S. No.
Amount of Advance sanctioned to a Government Servant
Rate of Interest on HBA (Per Annum).
1.
Upto Rs. 50,000/-
5%
2.
Upto Rs. 1,50,000
6.5%
3.
Upto Rs. 5,00,000/-
8.5%
4.
Upto Rs. 7,50,000/-
9.5%
 
8.COMMENCEMENT OF RECOVERY:
Construction of a house or enlargement of living accommodation
* From pay for the month following the completion.
Or
The pay for the 18th month after date of payment of the 1st installment, whichever is earlier.
Purchase of land and construction.
* From pay for the month following the completion of the house.
Or
The pay for the 24th month after date of drawl of installment for purchase of land, whichever is earlier.
COMMENCEMENT OF RECOVERY(CONT’D):
Ready built flat.
* Pay for the month following the month in which advance was drawn.

Purchase of Flat under SFS from Development Authority/Housing Society.

* From the pay for the 18th month after date of payment of 1st installment.
* 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…


Year/Month


IBB


Installment


Interest


Oct-98


81875


716

Nov-98

81875


716

Dec-98

81875


716

Jan-99

81875


716

Feb-99

81875


716

Mar-99

81875


716

Apr-99

81875


716

May-99

81875


716

Jun-99

81875


716


Jul-99


163750


1433

Aug-99

163750


1433

Sep-99

163750


1433

Oct-99

163750


1433

1


Nov-99


162250


1500


1420

2

Dec-99


160750


1500


1407

3

Jan-00


159250


1500


1393

4

Feb-00


157750


1500


1380

5

Mar-00


156250


1500


1367

6

Apr-00


154750


1500


1354

7

May-00


153250


1500


1341

8

Jun-00


151750


1500


1328

9

Jul-00


150250


1500


1315

10

Aug-00


148750


1500


1302

11

Sep-00


147250


1500


1288

12

Oct-00


145750


1500


1275

13

Nov-00


144250


1500


1262

14

Dec-00


142750


1500


1249

15

Jan-01


141250


1500


1236

16

Feb-01


139750


1500


1223

17

Mar-01


138250


1500


1210

18

Apr-01


136750


1500


1197

19

May-01


135250


1500


1183

20

Jun-01


133750


1500


1170

21

Jul-01


132250


1500


1157

22

Aug-01


130750


1500


1144

23

Sep-01


129250


1500


1131

24

Oct-01


127750


1500


1118

25

Nov-01


126250


1500


1105

26

Dec-01


124750


1500


1092

27

Jan-02


123250


1500


1078

28

Feb-02


121750


1500


1065

29

Mar-02


120250


1500


1052

30

Apr-02


118750


1500


1039

31

May-02


117250


1500


1026

32

Jun-02


115750


1500


1013

33

Jul-02


114250


1500


1000

34

Aug-02


112750


1500


987

35

Sep-02


111250


1500


973

36

Oct-02


109750


1500


960

37

Nov-02


108250


1500


947

38

Dec-02


106750


1500


934

39

Jan-03


105250


1500


921

40

Feb-03


103750


1500


908

41

Mar-03


102250


1500


895

42

Apr-03


100750


1500


882

43

May-03


99250


1500


868

44

Jun-03


97750


1500


855

45

Jul-03


96250


1500


842

46

Aug-03


94750


1500


829

47

Sep-03


93250


1500


816

48

Oct-03


91750


1500


803

49

Nov-03


90250


1500


790

50

Dec-03


88750


1500


777

51

Jan-04


87250


1500


763

52

Feb-04


85750


1500


750

53

Mar-04


84250


1500


737

54

Apr-04


82750


1500


724

55

May-04


81250


1500


711

56

Jun-04


79750


1500


698

57

Jul-04


78250


1500


685

58

Aug-04


76750


1500


672

59

Sep-04


75250


1500


658

60

Oct-04


73750


1500


645

61

Nov-04


72250


1500


632

62

Dec-04


70750


1500


619

63

Jan-05


69250


1500


606

64

Feb-05


67750


1500


593

65

Mar-05


66250


1500


580

66

Apr-05


64750


1500


567

67

May-05


63250


1500


553

68

Jun-05


61750


1500


540

69

Jul-05


60250


1500


527

70

Aug-05


58750


1500


514

71

Sep-05


57250


1500


501

72

Oct-05


55750


1500


488

73

Nov-05


54250


1500


475

74

Dec-05


52750


1500


462

75

Jan-06


51250


1500


448

76

Feb-06


49750


1500


435

77

Mar-06


48250


1500


422

78

Apr-06


46750


1500


409

79

May-06


45250


1500


396

80

Jun-06


43750


1500


383

81

Jul-06


42250


1500


370

82

Aug-06


40750


1500


357

83

Sep-06


39250


1500


343

84

Oct-06


37750


1500


330

85

Nov-06


36250


1500


317

86

Dec-06


34750


1500


304

87

Jan-07


33250


1500


291

88

Feb-07


31750


1500


278

89

Mar-07


30250


1500


265

90

Apr-07


28750


1500


252

91

May-07


27250


1500


238

92

Jun-07


25750


1500


225

93

Jul-07


24250


1500


212

94

Aug-07


22750


1500


199

95

Sep-07


21250


1500


186

96

Oct-07


19750


1500


173

97

Nov-07


18250


1500


160

98

Dec-07


16750


1500


147

99

Jan-08


15250


1500


133

100

Feb-08


13750


1500


120

101

Mar-08


12250


1500


107

102

Apr-08


10750


1500


94

103

May-08


9250


1500


81

104

Jun-08


7750


1500


68

105

Jul-08


6250


1500


55

106

Aug-08


4750


1500


42

107

Sep-08


3250


1500


28

108

Oct-08


1750


1500


15

109

Nov-08


250


1500


2

110

Dec-08

0


250


0


10248125

163750


89671

Interest amount = 10248125 / 1200 X 10.5 = Rs.89671

Comments

  1. Dear sir,
    Iwork in kendriya vidyalayA NAMKUM & I9 OWN MY OWN HOUSE.i WOULD LIKE TO KNOW WHETHEr i may be allotted a qu7arter even if i have a house of my own.
    Please mention the rules as well.
    thanking you
    Dr. Tilak
    K.V.Namkum,ranchi

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