House Building Advance – How to calculate the interest for HBA

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 1^st 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 1stinstallment, 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 18thmonth 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