The $688 million HomeBuilder program will offer the grants to people who sign contracts to build or substantially renovate their home from Thursday until the end of the year.

Prime Minister Scott Morrison says this will drive a “tradie-led recovery” of the economy.

“If you’ve been putting off that renovation or new build, the extra $25,000 we’re putting on the table along with record-low interest rates means now’s the time to get started,” he said on Thursday.

The government anticipates the package will support 140,000 direct construction jobs and a million workers in the wider residential building sector, including architects, materials suppliers and manufacturers, and engineers.

The sector has been warning it faces massive job losses once projects already under way tail off, with people cautious about new home builds amid the economic downturn.

To date, 30 per cent of work has been cancelled.

The grants are open to people earning less than $125,00 a year, or $200,000 per couple.

They can be used for new homes valued up to $750,000 including land, or renovations worth between $150,000 and $750,000 that will result in the property being priced at $1.5 million or less.

The money can’t be used on investment properties or to build things outside the house such as swimming pools, tennis courts, outdoor spas and saunas, sheds or garages.

Work has to be done by a licensed builder, so owner-builders and DIY renovators miss out.

The program is demand-driven, but the price tag suggests the Government expects about 27,500 people to take up the offer.

Before the virus, the sector forecast 171,000 new builds would start this year but that has now dropped to 111,000.

Grants will be paid via the states once each jurisdiction signs up.

Treasurer Josh Frydenberg was confident ahead of the program’s announcement the states would come on board and perhaps complement the scheme with their own measures.

Master Builders Australia chief executive Denita Wawn said the program would be a lifeline for the embattled industry.

“It will mean more new homes, more small businesses and jobs are protected and (it will) provide a stronger bridge to economic recovery for our country,” she said in a statement.

HomeBuilder is likely to come under fire from Labor and the Greens, who have been calling for an injection of funds into social housing as a way of supporting the construction sector.

Opposition housing spokesman Jason Clare said this week a grants program might encourage an extra 10,000 or 15,000 people to sign building contracts, and failing to build or improve public housing and address homelessness would be a massive missed opportunity.