G.O.(Ms.)No.4, Re-introduction of Hire Purchase System for LIG/MIG Flats and Houses, Dropped, 2024

What the government decided

The Housing and Urban Development (HB3(1)) Department, through G.O.(Ms.)No.4 dated 11 January 2024, decided not to proceed with the announced re-introduction of the hire purchase system for Tamil Nadu Housing Board flats and houses in the EWS, LIG and MIG categories. The announcement had been made during the 2021-2022 Budget Session to reduce post-Covid economic stress among home buyers.

The Managing Director of the Tamil Nadu Housing Board was directed to take action in line with the decision. The Finance Department concurred with the order.

Background to the proposal

The Tamil Nadu Housing Board had resolved on 20 October 2021 to approve a policy for bringing back hire purchase, restricted to flats and houses in the LIG and MIG categories. It also proposed that a committee or subcommittee prepare detailed implementation guidelines.

The Managing Director of the Tamil Nadu Housing Board later requested government approval for hire purchase for LIG and MIG flats and houses. After examining the request, the government dropped the wider ministerial announcement covering EWS, LIG and MIG categories.

Reasons recorded by the government

The Housing and Urban Development (HB3(1)) Department recorded the following considerations:

• Annual payments of Rs.1,50,000 for 20 years at 9% interest would correspond to a loan of Rs.14 lakh.
• An initial deposit equal to 20% of the cost would be Rs.3.5 lakh, making the recoverable unit cost Rs.17.5 lakh at the cost then considered.
• The document states that this was the unit cost of EWS housing being built by the Tamil Nadu Urban Habitat Development Board, and that using the model for LIG and MIG units would be financially unsustainable and cause a loss to the public exchequer.
• The Tamil Nadu Housing Board's capacity to recover costs was considered limited, except in self-financing arrangements linked to salaried buyers with full recovery before handover.
• The government considered affordability, rather than a shortage of homes available for purchase, to be the main issue.
• Hire purchase for MIG and HIG housing was viewed as an untargeted hidden subsidy rather than targeted EWS support.

Existing allotment conditions noted

G.O.(Ms.)No.4 repeats earlier conditions for unsold Tamil Nadu Housing Board houses, flats and plots. Applicants should be natives or residents of Tamil Nadu, should have completed 21 years of age on the registration date, and members of the same family should not receive more than one house, flat or plot. The document does not state that these conditions are cancelled.