What is Pradhan Mantri Awas Yojana? How to get a subsidy with PMAY?

A Guide to Getting Subsidy on House Loan

The government of India launched 'Pradhan Mantri Awas Yojana- Housing Scheme for All' with the aim of providing a place to live for every Indian citizen by the year 2022. However, individuals can also avail subsidy on home loan interest if they meet the necessary criteria. Individuals benefit from purchasing a new house and also from subsidies on extensions or improvements of the current house.

In the year 2017, the Government approved the Credit Linked Subsidy Scheme (CLSS) implementation for the Middle Income Group (MIG). Thus, the Government announced an extension for the CLSS scheme for a year. However, all the interest subsidy is given under the Credit Linked Subsidy Scheme.

Credit Linked Subsidy Scheme

Credit Link Subsidy Scheme is a component of the Pradhan Mantri Awas Yojana. The Government of India offers interest subsidy to individuals on home loans who fall under:

1. Economically Weaker Section (EWS)/ Low Income Group (LIG)

Under the EWS or LIG scheme, the rate of interest offered is 6.50 percent on the interest subsidy. The interest is provided for the tenure of the loan or 20 years, whichever is lower. An individual can claim interest on the loan for up to INR 6 lakhs with a maximum subsidy amount of INR 2.20 lakhs.

2. Revised Economically Weaker Section (EWS)/ Low Income Group (LIG)

The Government has revised the Economically Weaker Section or Low Income Group scheme. The interest subsidy under this scheme is provided at the rate of 6.50 percent. In this scheme, the subsidy is offered for 20 years or the home loan's actual tenure. The subsidy is on the home loans approved on or after January 1, 2017, and the maximum subsidy amount an individual would receive is INR 2.67 lakhs.

3. Middle Income Group- I (MIG-1)

Applicants eligible for MIG-1 category can avail subsidy at  4 percent, with the maximum amount of loan being INR 9 lakhs. However, the maximum term of the loan considered for calculating subsidy is 20 years, and the maximum subsidy that can be availed is INR 2.35 lakhs.

4. Middle Income Group-II (MIG-2)

Applicants who fall under the middle-income group-II category can get a maximum loan amount subsidy of INR 12 lakhs. The beneficiaries can get an interest subsidy at the rate of 3 percent. However, the maximum subsidy that individuals can avail is INR 2.30 lakhs. The term on which subsidy is calculated is 20 years.

What is the Eligibility Criteria for Pradhan Mantri Awas Yojana (PMAY)?

To avail the full benefits of PMAY, the following eligibility criteria needs to be fulfilled:

Basic Eligibility Criteria

• The Pradhan Mantri Awas Yojana scheme is for the families that comprise husband, wife and not married children. However, the adult in the family who is earning is treated as a separate entity, irrespective of marital status.
• There should not be any pucca house in the name of the beneficiary or any family member across the country.
• For married couples, either spouse or both partners in joint ownership would be treated as a single person. Thus, they are entitled to a single subsidy only.
• The beneficiary or his family should not benefit from any government scheme under the Pradhan Mantri Awas Yojana.
• The home loan borrowers who have already availed of the subsidy but switched to a different lender for balance transfer cannot claim the benefit again.
• The families of the beneficiaries who come under the MIG category need to furnish their Aadhaar number to receive the subsidy's benefits.

Eligibility Criteria As Per Income Parameters:

1. Economically Weaker Section (EWS)/ Low Income Group (LIG)

• Eligible Family Income: The household income as per the income category must be:

Economically Weaker Section (EWS)- Upto INR 3 lakhs

Low Income Group (LIG)- Between INR 3 lakhs and INR 6 lakhs

• Woman Ownership: The ownership of a woman is mandatory. Plus, the house that is either existing or new should be under the name of an adult female member of the family, or joint ownership with the wife. However, this condition is not mandatory for the under-construction house or renovation/extension of the existing semi-pucca or the kucha houses. Also, the house can be entirely under the male member of the family, the condition being no adult female member is residing in the house.
• Carpet Area: The house should have a maximum carpet area of:

Economically Weaker Section (EWS)- Up to 30 sq. mts

Low Income Group (LIG)- Up to 60 sq. mts

2. Middle Income Group (I &II)

• Eligible Family Income: The yearly household income under this category must be:

Middle Income Group-1- Anywhere between INR 6 lakhs and INR 12 lakhs.

Middle Income Group-2- Anywhere between INR 12 lakhs and INR 18 lakhs.

• Women Ownership: Women don't need to have ownership under this category to benefit from Credit Linked Subsidy Scheme.
• Carpet Area: The houses that need to qualify for this scheme should have a carpet area of:

Middle Income Group-I- Up to 160 sq. meters.

Middle Income Group-II- Up to 200 sq. meters.

How to Claim PMAY Interest Subsidy Benefit?

Under the PMAY scheme, the home loan interest subsidy should be routed through two central nodal agencies NHB and Housing & Urban Development Corporation. Further, the government institutions ensure the pre-listing lending institutions that further help eligible beneficiaries receive the interest subsidy benefits. However, the process to claim interest subsidy benefit is:

• After the home loan is disbursed, the lender will send details to the National Housing Bank to validate data and other requirements.
• After due diligence, the National Housing Bank approves subsidy to the eligible borrowers.
• After that, the lender borrowers would receive the subsidy amount.
• Once the lender's subsidy amount is received from the National Housing Bank, he will credit the same to the borrower's home loan account, and the loan will be adjusted accordingly.

What are the Benefits of the Credit Linked Subsidy Scheme?

There are a few benefits on availing the subsidy on the home loans, and these are:

• The borrowers receive the subsidised amount from the Government directly in the loan account. This brings down the principal outstanding amount and further reduces the EMIs.
• With EMIs becoming easy to manage, the housing loan can be repaid quickly. However, if a borrower wants to pay the actual EMIs, then the loan's tenure shortens. The borrower can select suitable options as per the convenience.
• The applicants who claim this subsidy are also eligible for the tax benefits on the home loan. Under the IT Act 1961, applicants can easily claim tax exemption of INR 2 lakhs on the interest payable and up to INR 1.5 lakhs on principal repayment in one fiscal year.

How to Calculate Interest Subsidy Under CLSS?

To calculate the interest subsidy on the home loan scheme, you can use the home loan EMI calculator available on the lender's website. Suppose you want to avail CLSS scheme, and you fall in MIG II group, and you take a home loan of about INR 32 lakhs for 20 years. In this scenario, your EMI would be INR 30,881, and the loan amount that is eligible for subsidy would be INR 12 lakhs. Thus, when adding the interest rate of 3 percent and calculating the EMI using the PMT formula on excel, you will notice that the EMI is reduced a little more than how much you were supposed to pay, i.e., below INR 6600 per month. Plus, there are various schemes that lenders provide to the borrowers that might be beneficial for them.

The Government has launched the Pradhan Mantri Awas Yojana to ensure that houses are readily available to the people and the homeowners can purchase them on flexible terms. Thus, find the home of your choice and enjoy the benefits.

Also read:

1) What Are the Different Agricultural Subsidies, and How To Avail Them?
2) What is a business loan? How to apply for a business loan?
3) How To Get Small Business Loan From Government?
4) What is Business Loan? A Complete Guide.