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A Federal Government program offering cash grants for housing construction projects has been extended, but at a lower amount.

The HomeBuilder scheme currently provides $25,000 grants to eligible people building a new home or renovating an existing one.

It had been due to expire at the end of the year but has been extended to March 31, 2021, at the lower rate of $15,000.

Prime Minister Scott Morrison said the extension was expected to lead to another 15,000 construction projects, bringing the total anticipated renovations or builds under the program to 42,000.

"It's critical we keep the momentum up for Australia's economic recovery," Morrison said.

"Extending HomeBuilder will mean a steady pipeline of construction activity to keep tradies on the tools."

Property price caps for new builds in two states will be lifted for contracts signed between January and March next year, rising to $950,000 in New South Wales and $850,000 in Victoria.

The amount of time all approved applicants who signed contracts on or after June 4, 2020, are given to start construction will also be extended, from three months to six months.

Of the 24,000 applications made to the scheme so far, the majority (19,180) are for new builds while the rest (4,697) are for renovations.

Master Builders Australia CEO, Denita Wawn, said the extension will help save thousands of builder and tradie businesses from going under and protect thousands more jobs in the building supply chain.