Explain the PM subsidy scheme on a home loan?

In June 2015, Prime Minister Narendra Modi introduced the ‘Pradhan Mantri Awas Yojana’ scheme. The PMAY is a special home loan subsidy scheme which was announced to complete the ‘housing for all’ initiative. The scheme aims to build 20 million houses by March 31st, 2022 to provide affordable housing facilities to the urban and rural poor masses. PMAY has a central agenda to give housing to Economically Weaker Sections and Low Income Groups of the country. The Central Government has proposed financial assistance of Rs. 2 trillion for the PMAY scheme.

Government of India will provide an interest subsidy of up to 6.5 % on house loans for 20 years. There is no capping on the maximum loan amount, and the additional interest rate beyond the threshold limits will be calculated under non-subsidized rates. The Pradhan Mantri Awas Yojana scheme has numerous benefits for people who face problem in gathering funds for building their house. Some of the benefits of Pradhan Mantri Awas Yojana are:

  • The interest subsidy amount will be directly credited to the beneficiary’s loan account, which will reduce the burden of monthly installments.
  • The maximum loan tenure for availing the interest subsidy on a home loan is 20 years, which is more than enough to pay back the home loan amount along with interest.
  • Interest subsidy Net Present Value (NPV) will be calculated at a subsidized rate of 9% only.
  • There is no capping on the maximum loan amount, which can be availed on the cost of the property.
  • Beneficiaries can also opt for additional loan amount apart from the specified limits, but it will be charged with standard non-subsidized interest rates.
  • Both the bodies, i.e., National Housing Bank (NHB) and Housing and Urban Development Corporation (HUDCO) will reimburse the interest subsidy to lending institutions. No excess processing will be charged from the borrowers.

Other Pradhan Mantri Awas Yojana details are discussed as below:

  • PMAY scheme for MIG-2 group

 Individuals with an annual income of up to Rs 18 lakhs fall under the MIG-2 category. They can get an interest subsidy for a loan amounting to Rs. 18 lakhs and the carpet area of the house should be at least 200 square meters.

  • PMAY scheme for MIG-1 group

Middle Income Group (MIG-1) comprises of individuals with annual income up to Rs 12 lakhs. Beneficiaries falling in this category can get an interest subsidy of 4% for a loan amount of up to Rs. 9 lakhs and floor area of 160 square meters.

  • PMAY scheme for EWS and LIG groups

Individuals who have an annual income less than or equal to Rs. 6 lakhs fall under the category of Economically Weaker Sections (EWS) and Lower Income Group (LIG). Those under this category can get an interest subsidy of 6.5 % for a loan amount of up to Rs. 6 lakhs and floor area of at least 60 square meters.

The Pradhan Mantri Awas Yojana details are also available on the official site of Ministry of Housing and Urban Poverty Alleviation.

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