The Housing and Urban Development Corporation (HUDCO) is set to reduce the lending rates by up to 1.25 percent on the government funded and private housing projects for economically challenged sections.

The new lending rates will be effective from June 23, 09.

The state-run organization had earlier severed the lending rate by up to 125 basis points with effect from January 1, 2009. The company reduced interest rates on ‘Hudco Niwas', the individual home loan by 50 basis points for loans amounting up to Rs 20 lakh on FRR basis.

The rates on EWS housing projects have also been reduced by 1 to 8.75 percent.

The interest rates on home loans with payback period of up to five years have been reduced by 125 basis points to 10.25 percent from the earlier 11.50 per cent.

The rates on home loans with payback period exceeding five years, was reduced by 100 basis points to 10.75 per cent from the earlier 11.75 per cent.

The MOU between the Ministry of Housing & Urban Poverty Alleviation and HUDCO mandates that 84 percent of the loans sanctioned, in the current fiscal must cover lower income groups and economically weaker section.

The economically weaker sections - EWS includes widows, scheduled castes and scheduled tribes.

Similar projects have been taken up by the union government, under the Interest Subsidy Scheme for Housing the Urban Poor (ISSHUP) which aims at development of low-cost housing units for urban poor. The scheme is a part of Jawaharlal Nehru National Urban Renewal Mission (JNNURM), which aims to low cost affordable housing for lower sections.