It is a debt if it has to be repayed. the aspect of interest free should be reviewed. the government never gave me an interest free loan when I bought my house.
The loan and a reasonable accrued interest should be paid back when the property is sold. say 3%
This way the tax payers money, which could have been earning interest or the interest on the money the government borrowed to make the 'grant' (long term loan) will be correctly repaid rather than lost.