The Finance Ministry plans to offer 70 billion baht in pre- and post-financing loans for its affordable housing scheme under the Pracha Rat (People's State) initiative, finance permanent secretary Somchai Sujjapongse said.

Of the total, 40 billion baht will be for post-financing and the remaining 30 billion for pre-financing.

The Government Savings Bank (GSB) and GH Bank will take charge in providing the  post-financing to tenants and buyers participating in the low-cost housing scheme, he said, adding that each bank will lend 20 billion baht each.

Under the mortgage scheme, the two banks will offer interest-free loans for the first year to ease the financial burden for tenants.

The interest rate in the following years, however, will not be so low as to hit the banks' bottom lines, as the loans are not part of the public service account (PSA) -- credit extended by state banks and subsidised by the government.

For pre-financing, GSB, GH Bank and Krungthai Bank will be the lenders.

The scheme is aimed at allowing low-income earners to afford a 30-year lease or mortgage on a home. The affordable housing will be built by the Treasury Department and private sector.

The Treasury Department has flagged six state land plots, two of them in Bangkok, for construction of 3,400 low-cost homes. The first low-cost housing projects in Bangkok will be built on a plot behind the former site of the Royal Mint on Pradiphat Road and on Soi Wat Phai Ton in Phaya Thai district.  

Mr Somchai said the Finance Ministry would not offer any tax incentives to the private sector as business operators have not requested them.

The private sector, in fact, will reap the benefits from selling the low-cost housing, he said.

Fiscal Policy Office director-general Krisada Chinavicharana said 3,000 housing units classified as non-performing assets of the two state-run asset management companies -- Sukhumvit Asset Management and Bangkok Commercial Asset Management -- along with some residential units of state-run banks, will be bundled into the low-cost housing scheme.

These homes will be priced at not higher than 700,000 baht a unit, he said, adding that buyers will be liable for a 2,000 baht monthly instalment payment.    

The low interest mortgages will widen opportunities for low-income earners to gain better access to financial resources and have their own homes, he said.