A house or flat on ownership is a dream for every family. The last few years saw a big spurt in the prices of flats especially in the metros, leaving the desire for a flat beyond the reach of the middle class. The exorbitant prices adversely affected the real estate business and flat sales declined considerably. The Government intervened in various ways, the most notable being the Pradhan Mantri Awas Yojana (PMAY) which included a credit linked subsidy scheme (CLSS) resulting in considerable savings to the struggling middle and economically backward classes. Under this scheme, an eligible buyer of property under prescribed conditions can benefit up to an amount of Rs.2.6 lacs by way of interest subsidy.
The demand for affordable housing in the country is huge with 65% of home loans availed from public sector banks with the average cost of the property at around Rs.25 Lacs. The price of flats in Mumbai, as well as Gurugram near Delhi, are different with prices in land-starved Mumbai being much higher than the rest of the country, especially in upmarket areas. The subsidized home loans are therefore a major attraction for the middle class.
Some of the salient features of this scheme are as under.
The purpose of the loan is to give some relief to the lower classes hard pressed by the high cost of owning a dwelling, by way of an interest subsidy ranging from 6.5 % to 3.5% up to certain limits under the PMAY scheme. Thus for the Economically Weak Section (EWS) and the Low Income Group (LIG) with income up to 6 lacs, the interest subsidy eligible is 6.5% for loans up to 6 lacs, amounting to an interest subsidy totalling Rs.2.67 lacs over a 20 year period, credited directly to the loan account so the burden of repayment is reduced to that extent, bringing huge relief to the EWS group.
The interest subsidy available to the MIG-1 group is for loans up to 9 lacs at 4% while for MIG2 with a higher slab of income, the interest subsidy (3%) is available up to 12 lacs, as any amount above these limits will attract the normal, home loan rates. The maximum benefit available to a borrower under this scheme works out to around Rs.2.6 lacs. The scheme which was effective 1st January 2017, has undergone a few changes, especially on the carpet area from 90 to 120 sq. meters for MIG 1 and from110 to 160 sq. meters for the MIG-2 category and the scheme’s duration has been extended to March 2020.
These loans can be availed from any primary lending institute including Banks, Financial institutions, NBFCs.The processing fee for loans within the limit prescribed is quite low though, for higher amounts, processing fees will be applicable as per rules of the lender. This scheme is part of the government’s target to build 20 million affordable houses for all by 2022.
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