7th Central Pay Commission House Building Advance
Central Government provides a lot of facilities to its employees apart from salary and allowances (CGHS, LTC, Educational Assistance, Leave, etc.,). In this sequence, one more benefit is the ‘HBA Home Loan’ (House Building Advance).
A Home for Everyone – HBA is one of the initiatives by the Central Government
7th Pay Commission House Building Advance Rules and Regulations 2017: HBA is one of the most valuable benefits for Central Government employees. To buy a flat or build a house, the Central Government provides a bulk amount with the lowest interest rate and also a rebate available if certain restrictions are fulfilled.
House Building Advance New Rules Effect from November 2017 after implementation of the 7th pay commission
Purposes of House Building Advance Rules: Anyone of the following condition is admissible for BHA to Central Government employees:-
- New house construction on an owned plot
- Purchase of a plot
- Purchasing a plot from Co-Operative Group Housing Societies
- Purchasing a house from Self Financing Schemes
- Purchase of flat or new ready-built house
- Extension of already owned building
- Repayment of loan taken from Govt or Hudco or Private sources
- Migration of housing loans taken from banks and other financial institutions
- Construction only residential portion of the building on a plot earmarked for a shop-cum-residential plot
Eligibility Rules for House Building Advance
- All Central Government permanent employees
- All other employees with a minimum of 5 years of continuous service
- Member of All India Services deputed for service under the Central Government
- Employees of Union Territoires and North East Frontier Agency
- Staff and Artistes of the AIR
- CG Employees are governed by the payment of wages act 1936
- CG Employees on deputation to another Department or on Foreign Service
- Ex-Servicemen and suspended employees with extant rules for eligibility conditions
Rate of Interest for House Building Advance
The Interest on Housing Building Advance for the financial year 2017-18 onwards shall be 8.50%. This shall be reviewed every three years to be notified in consultation with the Ministry of Finance.
HBA Interest Rate 2019-20
The interest rate on House Building Advance (HBA) for Central Government Employees will be 7.9% from October 1, 2019
In cases where both the spouses are CG employees, both of them are admissible for the grant of HBA.
Cost of Ceiling of HBA
The cost of the house or plot should not exceed 139 times the basic pay and be subject to a maximum of Rs. 1,00,00,000. In individual cases, if the Administrative Ministry is satisfied with the merits of the case, the cost ceiling may be relaxed up to a maximum of 25% by the HoD.
Advance Amount of HBA
The maximum amount of HBA is 25 Lakhs. 34 months basic pay of Rs. 25 lakhs whichever is least for purchasing of new flat or house. For the expansion of the existing house, the HBA will be admissible is limited to 34 months of basic pay or a maximum of Rs. 10 lakh.
HBA Repaying Rules and Conditions
The repaying capacity of Central Government employees will be calculated as given below:
- In the case of an employee retiring after 20 years, the repaying amount will be taken as 40% of his basic pay
- In case of an employee retiring after 10 years but not less than 20 years, the repaying amount will be taken up to 40% of his basic pay and 65% of DCR Gratuity may also be adjusted.
- In case of an employee retires within 10 years, the repaying amount will be taken up to 50% of his basic pay, and DCR Gratuity up to 75% can be adjusted.
The Methodology of Recovery of House Building Advance
The methodology of recovery of HBA shall continue as per the existing pattern of recovery of principal first in the first fifteen years in not more than 180 monthly installments and interest thereafter in the next five years in not more than 60 monthly installments. The advance carries simple interest from the date of payment of the first installment.
All cases of subsequent tranches/installments of HBA being taken by the employee in different financial years shall be governed by the applicable rate of interest in the year in which the HBA was sanctioned, in the event of a change in the rate of interest.
Note: The clause of adding a higher rate of interest at 2.5% above the prescribed rate during sanction of House Building Advance, as reproduced below, stands withdrawn.
“Sanction should stipulate the interest 2.5% over and above the Scheduled Rates With the stipulation that if conditions attached to the sanction including those relating to the recovery of amount are fulfilled Completely to the Satisfaction of Competent authority, a rebate of interest of the extent of 2.5% Will be allowed”.
Disbursement of HBA
Advance for purchase of a ready built house can be paid in One Lump Sum as Soon as the applicant executes an agreement in the prescribed form. The employee should ensure that the house is purchased and mortgaged to the Government Within 3 months of drawl of the advances.
Advance for purchases/construction of new flats may be paid either in One lump sum or in convenient installments at the discretion of the Head of Department. The employee should execute the agreement in the prescribed form before the advances / first installment of advance is paid to him/her. The amount drawn by the employee should be utilized for the purchase/ construction of the flat within one month.
Advance for construction/expansion of living accommodation, etc., shall be payable in two installments of 50% each. The first installment will be paid after the plot and proposed houses / existing house is mortgaged and the balance on the Construction-reaching plinth level.
Advance for expansion to be carried out on the upper story of the house will be disbursed in two installments, the first installment on executing the mortgage deed and the second installment on the construction reaching roof level. In the case of advance for purchase of plot and construction of the house, the advance will be disbursed as below:
a) Single Storeyed House: After agreement in prescribed form is executed on the production of the surety bond, 40% of the advance or actual cost will be disbursed for the purchase of the plot. The balance amount will be disbursed in two equal installments, first after the mortgage is executed and second on the construction reaching plinth level.
b) Double Storeyed House: 30% of advance for the cost of plot will be disbursed on executing the agreement. The balance amount will be disbursed in two equal installments, the first on executing the mortgage deed and the second On construction reaching plinth level.
Mortgage and Creation of Second Charge
a) House shall be mortgaged on the behalf of the President of India. However, the employee, if he wishes to take a second charge to meet the balance Cost of the house’s plot or flat from recognized financial institutions, then he/ she may declare the same and apply for NOC at the time of the applying for HBA. NOC for the second charge will be given along with the sanction order of HBA. The total loan form HBA and from all other Sources Cannot be beyond the ceiling cost of the house as defined under para 4 above.
b) In case if HBA is availed by both husband/ wife jointly,
i. HBA Mortgage paper, insurance paper and other papers regarding property shall be submitted to one of the loan sanctioning authorities Of their choice.
ii. A No Objection Certificate may be obtained from the 2nd loan sanctioning authority.
iii. The property mortgaged to behalf of the President of India, shall be reconvened on the prescribed form to the central government employee concerned (or their successors in interest, as the case may be), after the advance together with interest thereon, has been repaid to Government in full and after obtaining No Demand Certificate in respect of HBA loan sanctioned by the 2nd loan sanctioning authority.
Insurance for House
Immediately on completion of construction/purchase of house/flat, the employee shall insure the house with the recognized institutions as approved by Insurance Regulatory and Development Authority (IRDA), for not less than the amount of advance and shall keep it so insured against damage by fire, flood and lightning till the advance together with interest thereon is repaid in full and deposit the policy documents with the Head of the Department (HoD). Renewal of insurance will be done every year and premium receipts produced for the inspection of the HoD regularly.
Penal interest of 2% over and above the existing rate of interest will be recovered from the employee for those periods which are not covered by the insurance of the house.
Migration of HBA
For existing House Building Advance beneficiaries who wish to migrate, a separate order for migration to the revised House Building Advance rules will be issued shortly.
|Suggestions on HBA in 7th CPC Report|
|34 times Basic Pay
|The requirement of a minimum of 10 years of continuous service to avail of HBA should be reduced to 5 years.
If both spouses are government servants, HBA should be admissible to both separately.
Existing employees who have already taken Home Loans from banks and other financial institutions should be allowed to migrate to this scheme.
House Building Advance (HBA) rules for Central Government Employees after the 7th Pay Commission
House Building Advance Rules (HBA) 2017
The Government has revised the House Building Advance (HBA) rules for Central Government Employees with effect from November 2017. An Office Memorandum was issued on 9th November 2017 by the Ministry of Housing and Urban Affairs.
As per the OM, the following points are new features of the HBA rules:-
- The total amount of advance that a central government employee can borrow from the government has been revised upwards. The employee can up to borrow 34 months of the basic pay subject to a maximum of Rs. 25 lakhs (Rs. Twenty Five Lakhs only), or the cost of the house/flat, or the amount according to repaying capacity, whichever is the least for new construction/purchase of new house/flat. Earlier this limit was only Rs.7.50 lakhs.
- Similarly, the HBA amount for expansion of the house has been revised to a maximum of Rs.10 lakhs or 34 months of basic pay or cost of the expansion of the house or amount according to repaying capacity, whichever is least. This amount was earlier Rs.1.80 lakhs.
- The cost ceiling limit of the house that an employee can construct/ purchase has been revised to Rs.1.00 crore with a proviso of upward revision of 25% in deserving cases. The earlier cost ceiling limit was Rs.30 lakhs.
- Both spouses, if they are central government employees, are now eligible to take HBA either jointly, or separately. Earlier only one spouse was eligible for House Building Advance.
- There is a provision for individuals migrating from home loans taken from Financial Institutions/ Banks to HBA if they so desire.
- The provision for availing ‘second charge’ on the house for taking loans to fund balance amount from Banks/ Financial Institutions has been simplified considerably. ‘No Objection Certificate’ will be issued along with the sanction order of HBA, on the employee’s declaration.
- Henceforth, the rate of Interest on Housing Building Advance shall be at only one rate of 8.50% at simple interest (in place of the earlier four slabs of bearing interest rates ranging from 6% to 9.50% for different slabs of HBA which ranged from Rs.50,000/- to Rs.7,50,000/-).
- This rate of interest shall be reviewed every three years. All cases of subsequent tranches/ installments of HBA being taken by the employee in different financial years shall be governed by the applicable rate of interest in the year in which the HBA was sanctioned, in the event of a change in the rate of interest. HBA is admissible to an employee only once in a lifetime.
- The clause of adding a higher rate of interest at 2.5% (two point five percent) above the prescribed rate during sanction of House Building Advance stands withdrawn. Earlier the employee has sanctioned an advance at an interest rate of 2.5% above the scheduled rates with the stipulation that if conditions attached to the sanction including those relating to the recovery of amount are fulfilled completely, to the satisfaction of the competent authority, a rebate of interest to the extent of 2.5% was allowed.
- The methodology of recovery of HBA shall continue as per the existing pattern recovery of principal first in the first fifteen years in 180 monthly installments and interest thereafter in the next five years in 60 monthly installments.
- The house/flat constructed/purchased with the help of House Building advance can be insured with the private insurance companies which are approved by Insurance Regulatory Development Authority (IRDA).
- This attractive package is expected to incentivize the government employee to buy houses/flats by taking the revised HBA along with other bank loans if required. This will give a fillip to the Housing infrastructure sector.
How to Calculate Interest for HBA?
A simple interest calculation is followed for HBA. The amount of interest is determined depending on the outstanding balance on the last day of the month. The interest rates are applicable from 6% to 9.5% according to the loan amount.
HBA Interest Rates Declined from 8.5% to 7.9%
The Central Government has decided to reduce the interest rates on House Building Advance from 8.5% to 7.9% with effect from 1.10.2019.
To boost the Real Estate Sector, the Centre has taken new measures in various steps like reduction of GST and allocation of more funds. And now another measure on target of Central Government employees, the rates of interest on HBA reduced to 7.9%. The move will help the Government employees to build new houses or buy a new flat of their own.
7th CPC HBA – Expectation on House Building Advance for CG Employees
Changes are expected in the 7th CPC on House Building Advance…
- Eligibility Service should be revised
- The amount of Advance should be increased
- HBA calculation should be on Basic pay (pay in the band + Grade Pay)
- 34 times and 80% are not sufficient
- Conditions of repaying capacity should be revised.
- The rate of Interest should be decreased
- Second Mortgage rules to be relaxed