There is currently a huge shortage of affordable houses in India. The houses which are currently available for sale are too expensive and in most cases, out of reach of the lower middle-class population of India.

There is a shortage of approx. 2 crore houses in India for the rural and urban-poor population. The need of the hour for these populations is affordable houses.

To help the rural and urban population fulfil their dream of owning a house, the government has launched the Pradhan Mantri Awas Yojana scheme, which will help facilitate the construction and purchase of affordable houses in India.

What is Pradhan Mantri Awas Yojana Credit Linked Subsidy Scheme?

It is a scheme launched by the government to facilitate the construction and purchase of affordable houses in India. The 4 key aspects of this scheme are: –

  1. Subsidy for purchase of a house
  2. Subsidy for self-construction of a house
  3. Slum rehabilitation
  4. Affordable housing in partnership with public & private developers

Interest Subsidy for Purchase of a House

An interest subsidy would be provided under this scheme for purchase of affordable houses. The credit subsidy would be credited upfront to the loan account of the beneficiaries resulting in reduced effective Home Loan EMI.

Interest Subsidy for EWS/ LIG Scheme

The economically weaker section group (EWS) and Low-Income Group (LIG) seeking Housing Loans from other Financial Institutions would be eligible for an interest subsidy of up to 6.5%.

This Credit linked subsidy scheme (CLSS) for EWS category is applicable only for loans up to Rs. 6 Lakh. Additional loans (if any) would be available at non-subsidized rates.

In order to avail this subsidy, the carpet area of houses being constructed or enhanced under this should be 30 sq meters for EWS Category and 60 square meters for LIG Category. The loan applicant can at his discretion build a house of a larger area, but the interest subsidy would be limited to Rs. 6 Lakh only.

EWS category households are defined as households having an annual income up to Rs. 3 Lakh

LIG Category households are defined as households having an annual income between Rs. 3 Lakh and Rs. 6 Lakh.

For MIG I, the Carpet Area of Flat should be less than 160 sq meter and for MIG II, the Carpet Area of Flat should be less than 200 sq meter.

Interest Subsidy for MIG (Middle Income Group)

The interest subsidy for MIG Flats is given to the following type of borrowers:-

  1. MIG I – Income from Rs. 6 Lakh to Rs. 12 Lakh
  2. MIG II – Income from Rs. 12 Lakh to Rs. 18 Lakh

In the MIG I category, an interest subsidy of 4% has been provided for loan amounts up to Rs. 9 Lakh, while in the MIG II category, an interest subsidy of 3% has been provided for a loan amount of Rs. 12 Lakh.

Housing Loans of amounts higher than these would be at non-subsidized rates.

Scheme details

CLSS Scheme TypeEligibility Household Income (Rs.)Interest Subsidy (%)Subsidy calculated on a max loan ofLoan purposeValidity of SchemeMax Subsidy (Rs.)
EWS and LIGUpto Rs. 6 Lakh6.50%Rs. 6 LakhPurchase/ Self Construction/ Extension31/03/20222.67 Lakh
MIG 1Rs. 6 Lakh to Rs. 12 Lakh4.00%Rs. 9 LakhPurchase/ Self Construction31/12/20192.35 Lakh
MIG 2Rs. 12 Lakh to Rs. 18 Lakh3.00%Rs. 12 LakhPurchase/ Self Construction31/12/20192.30 Lakh

How will a person receive a subsidy under the PMAY Scheme?

The total interest subsidy for the entire tenure of the loan would be given to the applicant upfront. This would be given by the govt at the start of the loan and the amount would be deposited in the loan account of the borrower.

The manner of claiming subsidy can be explained with the help of an example. For eg: An applicant applies for a Home Loan from Indiabulls Home Loans, intending to claim the benefit of the credit linked interest subsidy under the PMAY Scheme. In this case, the flow of events would be as follows:-

  1. The applicant applies for a Home Loan to Indiabulls and submits all the documents for the same.
  2. Indiabulls Home Loans checks the documents to determine the eligibility criteria and if the applicant is found credit-worthy, they’ll disburse the loan to the borrower.
  3. After the loan is disbursed, Indiabulls will claim interest subsidy on behalf of the borrower from the Central Nodal Agencies specified for this purpose. Currently, the National Housing Board (NHB) and Housing and Urban Development Corporation (HUDCO) have been identified as central nodal agencies for this purpose by the Govt.
  4. The Central Nodal agencies will do their due diligence to ensure that all conditions of this scheme are satisfied. Once the due diligence process is complete, the central nodal agencies would credit the subsidy amount to the Home Loan account that the applicant would have opened with Indiabulls.
  5. On receipt of this amount by Indiabulls from the Central Nodal Agencies, the effective loan outstanding would reduce.
  6. As the effective loan outstanding would reduce, EMI’s payable by the applicant would be reduced proportionately.

Other Relevant Conditions

  1. For the purpose of identification of EWS/ LIG segments, the individual loan applicant shall submit self-certificate/affidavit as proof of income.
  2. In case a borrower who has taken a housing loan and the benefit of this credit-linked interest subsidy scheme but later switches the loan to some other organization as balance transfer, the loan applicant would not be eligible to claim the benefit of the interest subsidy again.
  3. The primary motive of this scheme is to provide housing for all. Therefore, those who already own a house or have family members who own a house are not eligible to claim the benefit of subsidy under this scheme.
  4. The beneficiary family would comprise of husband, wife and unmarried children. (An adult earning member irrespective of marital status can be considered as a separate household in the MIG Category).
  5. The person claiming this subsidy would also be eligible for Tax Benefits of Home Loan.