How does the government’s home loan subsidy benefit you?

Every person’s dream to buy a home or apartment will now be fulfilled through the Pradhan Mantri Awas Yojana (Urban) (PMAY). The Central Government has extended the benefit of interest subsidy on home loans for those people who fall into the middle income group (MIG). The subsidy was announced by the Central Government for meeting the ‘Housing for All’ target in urban areas by 2022. These subsidies prove to be extremely beneficial for providing housing to the economically less privileged segments, where even small decreased variations in the total cost incurred while buying a home or apartment makes a significant difference. This scheme has been extended till March 2019 and it is important to know about it in detail.

Who are the ones eligible?

It is important to know what makes one eligible for attaining housing loans through Credit Linked Subsidy Scheme (CLSS) under the Pradhan Mantri Awas Yojna. Under CLSS, middle income beneficiaries with annual household income between Rs. 6 lakh and Rs. 12 lakh (categorised as MIG I) would get an interest subsidy of 4.00% on a 20-year loan component of up to Rs9 lakh. Those with annual household incomes of more than Rs. 12 lakh and up to Rs. 18 lakh (categorised as MIG II) would get interest subsidy of 3.00% on a 20-year loan component of up to Rs. 12 lakh.
If one would want to buy a home with additional loans beyond the specified limit, those will be at non-subsidized rates. Under this scheme, the annual family income is recognized as the incomes earned by husband, wife, unmarried sons and/or unmarried daughters. This scheme is applicable only to those families where none of the family members own a pucca house (an all-weather dwelling unit) in their name, in any part of the country.

How do you apply?

One can apply for a housing loan under CLSS from a set of Primary Lending Institutes (PLIs) listed under the scheme. While planning to buy a home or apartment by taking any loan, there are certain basic requirements that will need to be submitted as documents. Apart from these common application documents, nothing additional is required.

Another important document is a self-declaration form stating no ownership of a pucca house, in thedescribed format, which needs to be submitted to the lending institution to avail the subsidy. The interest subsidy will be credited upfront to the loan account of the beneficiaries’ through the PLI, resulting in reduced effective housing loan and equated monthly instalments (EMIs). It is important to note that, in case the borrower who has availed an interest subsidy under this scheme later decides to switch to another lending institution, the beneficiary will not be eligible to claim the benefit of this scheme thereafter.

What are the provided sizes of the homes?

Buying a home with a loan under this scheme comes with certain pre-decided dimensions for the house. The government in November 2017 has increased the carpet area in the MIG I category of CLSS from 90 square meters to 120 square meters and the carpet area in respect of MIG II category of CLSS from the 110 square meters to 150 square meters.

What is the loan tenure?

While deciding to buy a home with the essential requirements under the CLSS, the buyer has to decide on a tenure required to pay back the loan. The maximum tenure provided for home loans under CLSS is 20 years or a period of time as suggested by the buyer, whichever is lower.

What are its benefits?

The CLSS under PMAY supports first time home buyers who fall under the specified categories and is extremely beneficial to them in many ways. One of the most important factors is that no bank or any other finance company will be allowed to charge a processing fee on the applicants who take a home loan under CLSS. The scheme looks into giving higher preference to women especially those who are widows and single working women. People who are differently abled or transgenders or if they fall into the categories of scheduled castes, scheduled tribes, backward classes, they are given special preference in availing the loan.

Attaining a loan under the Pradhan Mantri Awas Yojana is certain to fulfill the dream of buying a home for many. With immense support that the scheme provides for first time home buyers especially for the economically weaker class, the government will certainly be able to meet the ‘Housing for All’ target in urban areas by 2022.