Home Loan Guide

A Comprehensive Home Loan Guide For First Time Home Buyers In India.

Home Loan Guide

Pradhan Mantri Awas Yojana (PMAY)

Pradhan Mantri Awas Yojna Housing for all

The Pradhan Mantri Awas Yojana housing for all urban area envisages that everyone will have a home by 2022. The scheme was launched in 2015 by the central government with a view to ensure housing to all of the urban people by the year 2022. One of the key features of PMAY is the credit-linked subsidy scheme. This means that interest subsidy is extended to the beneficiaries as and when they take a housing loan.

The scheme also envisages central assistance to both states and union territories that focus on building houses for all eligible sections of people in urban slums, especially the economically weaker sections. Therefore, the major features of the project are slum rehabilitation and making available affordable housing to the people belonging to economically weaker sections.

In urban areas, interest subsidy is extended to three types of income groups. They are as follows:


Subsidy for Economically Weaker Sections

(Annual per capita income less than Rs. 300,000)

6.5 percent
Subsidy for Low Income Group

(Annual per capita income ranging from Rs. 300,001 to Rs. 600,000)

6.5 percent
Middle Income Group I

(Annual per capita income ranging from Rs. 600,001 to Rs. 1,200,000)

4.0 percent
Middle Income Group II

(Annual per capita income ranging from Rs. 1,200,000 to Rs. 1,800,000)

3.0 percent


On the basis of their pradhan mantri awas yojana eligibility, credit-linked subsidies will be extended to these categories of people. People belonging to the low per capita income category will get higher interest subsidy. The programme offers the following components or options to the cities and towns in states and union territories:

  • Rehabilitation of slum dwellers with the participation of developers in the private sector and using land as the resource
  • Promotion of inexpensive housing among under privileged through credit-linked subsidy programme
  • Affordable housing through participation from public and private sector developers
  • Pradhan Mantri home loan subsidy for construction or enhancement of individual house by the beneficiary
  • All statutory towns (as mentioned in Census 2011) and towns that are subsequently notified would be covered under the Mission

As per the provisions of the programme, the house constructed for the people belonging to the economically weaker sections shall be all-weather single units or one unit in a multi-storeyed building. There should be adequate basic civic amenities. Infrastructure amenities should include toilets, water, electricity, etc. States have the freedom to choose the area as per local needs.


Credit-linked Interest Subsidy Scheme

EWS/LIG

Credit-linked interest subsidy of 6.50 percent is provided by the Government of India for the actual term of the loan or 20 years, whichever is lower, to eligible people belonging to the EWS/LIG category. The subsidy is, however, limited to a maximum of Rs. 267,000.

  • The ownership of the house should either be in the name of the wife alone or it could be jointly owned by the husband and wife. However, this is not a mandatory condition when constructing a house in an existing piece of land or extending/renovating an existing Kuccha or Semi-pucca house.
  • The beneficiary must not be in possession of an all-weather house/pucca house either in his/her name or in the name of a family member elsewhere in India.
  • Under the scheme, the carpet area of the house constructed by EWS beneficiaries could go up to 30 sq. mts. and that constructed by LIG beneficiaries could go up to 60 sq. mts.

The central government provides an assistance of Rs. 150,000 per house for beneficiaries belonging to the EWS category. State Governments/affiliates, for instance, Housing Boards, might take up affordable housing projects and avail the Central Government grant.


MIG

The Credit-Linked Subsidy Scheme, in short CLSS, launched by the Government of India under the auspices of the Housing and Urban Poverty Alleviation Ministry for the MIG beneficiaries was initially implemented for a year (01.01.2017 to 31.12.2017). However, it has now been extended till 31.03.2019.

  • All statutory towns, mentioned in Census 2011, and towns that are notified subsequently, are eligible for MIG CLSS programme. Planning Area as specified in the case of Statutory Towns and the surroundings of the concerned Municipality are also covered under this Scheme.
  • The credit-linked subsidy for MIG-1 category will be for a loan amount of maximum Rs. 900,000.
  • The credit-linked subsidy for MIG-2 category will be for a loan amount of maximum Rs. 1,200,000.
  • However, there is no restriction on banks sanctioning home loans in excess of Rs. 900,000 or Rs. 1,200,000.
  • Interest subsidy would be provided for the actual term of the loan or 20 years, whichever is lower, even though banks may sanction a loan for 30 years. The repayment of the loan should be completed before the beneficiary attains 70 years of age.
  • Maximum subsidy available for MIG-1 and MIG-2 beneficiaries is Rs. 235,000 and Rs. 230,000, respectively.
  • The carpet area of houses being built by MIG-1 beneficiaries shall be a maximum of 160 sq. mts. For MIG-2 beneficiaries it could go up to 200 sq. mts.

Other key points to be noted as far as PMAY is concerned are:

  • A beneficiary means a family consisting of the husband, wife, and unmarried children.
  • An adult member who is earning an income is considered to be separate household, irrespective of his/her marital status. He/she can benefit from the subsidy independently.
  • Banks are required to submit a consolidated completion certificate of each housing unit within a period of one year from the date of completion of construction or within a period of 36 months from the date on which the first instalment of the home loan was disbursed. If the bank fails to provide the certificate, then the Bank will have to refund the subsidy amount to the CNA.
  • If a borrower takes a home loan, enrols for the Scheme, and avails interest subvention benefit, the beneficiary becomes ineligible for interest subvention benefit once again if he chooses later on to transfer the loan to some other bank.
  • The tenor of a home loan provided under this scheme – only as a term loan – will be a maximum of 30 years. Maxgain facility is not available under this Scheme. However, subsidy will be available only for a maximum period of 20 years.
  • All loan accounts opened under this Scheme will mandatorily be linked to the beneficiary’s Aadhaar number.

  • Tips:
  • The Ministry of Housing and Urban Affairs has raised the carpet area of houses that are eligible for interest subsidy under the PM Awas Yojna for the MIG category by 33 percent. The aim of this decision is to increase the number of beneficiaries in tier-3 and tier-4 cities as well as small municipal areas where the cost of housing is much lower.
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