To give a fillip to affordable housing across the country, the government is likely to clear a proposal to provide one per cent interest subsidy on housing loans up to Rs 10 lakh for houses not costing more than Rs 20 lakh.

The new interest subsidy scheme is likely to cost the exchequer around Rs 1,000 crore, and the home loans will be disbursed through nationalised banks and the National Housing Bank.

The proposal moved by the Kumari Selja-led housing and urban poverty alleviation ministry, is slated to come up before the union cabinet on Wednesday. "The proposal for housing loans up to Rs 10 lakh is aimed at boosting the housing shortage in the country, especially the shortage in the middle income and lower income segments," said a ministry official.

Last year, the government had announced interest subsidy of 5 per cent on loans up to Rs 1 lakh availed during the Eleventh Plan, for the urban poor. The loan repayment period varied between 15 and 20 years. The scheme, as per government estimates, would result in creation of additional housing stock of 3.10 lakh houses for economically weaker section (EWS) and low income group (LIG) households over the next four years.

"The proposal is a continuation of an older interest subsidy scheme, which has received a very positive response. However, in the proposed scheme, no income criteria for beneficiary have been set," said the official.

The scheme is likely to benefit home loan seekers in smaller towns and cities where housing projects are available in the price ticket of up to Rs 20 lakh. However, a vast majority of metro residents may not be able to avail of the benefits of this scheme as affordable housing in metros like Delhi is pegged at anywhere between Rs 15-30 lakh.