PMAY subsidy: How does the credit-linked subsidy scheme for EWS and LIG work?


We examine the eligibility criteria and the process of disbursal of home loans under the government’s Pradhan Mantri Awas Yojana scheme that provides interest rate subsidies to EWS and LIG individuals

Under its Pradhan Mantri Awas Yojana, the central government has been offering PMAY subsidy to those building, constructing and buying homes in India. This guide will help you understand how the PMAY subsidy works for different categories of applicants, divided into various sections, based on their annual income.

 

PMAY subsidy: What is it?

Under its Housing for All by 2022 mission, the government partly funds home purchases, by giving PMAY subsidy through two separate components. While the first scheme is applicable to the Economically Weaker Sections (EWS) and those under the Low-Income Group (LIG), the second scheme covers the Middle-Income Group (MIG).

 

 

Eligibility criteria for PMAY subsidy

The eligible category is divided into two parts:

  1. EWS
  2. LIG

This scheme is available for acquiring or constructing residential units in the 4,041 statutory towns as per the 2011 census and 274 additional towns, which have separately been notified by the state government. The details of such towns can be downloaded from http://nhb.org.in/government-scheme/pradhan-mantri-awas-yojana-credit-linked-subsidy-scheme/statutory-towns/

In order to qualify for the subsidy, the individual or spouse should not own an all-weather pucca house, either in his/her name or in the name of any unmarried child of the couple, in any part of India. In addition to acquisition or construction of a new house, a borrower can also avail of this facility for extension of his existing house, whether self-acquired or inherited. If the borrower wants to avail of the benefits, for extension or enhancement of his existing house for addition of rooms, kitchen, toilet, etc., then, the condition of pre-existence of a pucca house, shall not apply.

Moreover, the income for the purpose of qualifying under the scheme, is the income of the whole family as a unit and not of the head of the family only. For availing of the PMAY subsidy, the borrower has to submit a self-declaration, about the income and title of the property to be acquired, to the lender. As the government does not underwrite any part of the loan given under this scheme, lenders will have to follow their own due diligence process, for income and title of the property. The lender has to monitor the construction of the dwelling units financed under the scheme, like approvals for the building design, infrastructure facilities, the quality of construction, etc. The lender also has to verify the expenditure incurred up to different stages of construction, through site visits, etc.

So, the government will only provide the subsidy for such loans but the lender has to take all the other precautions, which it takes for any other regular home loan, as any non-payment or the loan becoming a non-performing asset, will be on the bank’s books.

The house which qualifies for the interest subsidy, can either be a single unit or a unit under any multistoreyed building. The eligible unit needs to have basic facilities and infrastructure like toilet, water, sewerage, road, electricity, etc. The area of the house, will only include the area on which a carpet can be laid, meaning that it will not include the walls in the house or the outer wall of the house.

See also: PMAY: Carpet area hike to push home sales in smaller cities

The house to be constructed or acquired under this scheme, should be in the name of the female head of the household or alternatively, in the joint name of the male head of the household and his wife. However, if there is no adult female member in the family, the house can be acquired in the name of the male member of the family.

The income eligibility and rate of interest subsidy available and the exact quantum of benefits under PM Awas Yojana is tabulated as under:

Particulars EWS LIG
Annual family income Upto Rs 3 lakhs Above Rs 3 lakhs and upto Rs 6 lakhs
House area Carpet area upto 30 sq metres Carpet area upto 60 sq metres
Rate of interest subsidy 6.50% 6.50%
Maximum loan eligible for subsidy Rs 6 lakhs Rs 6 lakhs
Maximum loan tenure 20 years 20 years

The maximum subsidy under this scheme can be Rs 2,67,280. The amount of subsidy will be reduced proportionately, if the loan amount is lower than Rs 6 lakhs. The subsidy benefit is only available for loans that are disbursed on or after June 17, 2015.

 

What constitutes as affordable housing under the PMAY?

The government provides subsidy benefits up to a certain price bracket, to promote the sale and purchase of affordable units. Under this, the Rs 45 lakh price bracket is considered the government-defined limit that constitutes affordable housing under the PMAY.

 

How is PMAY subsidy given?

The subsidy under this scheme is given as upfront relief, in the form of a reduction in the overall loan liability.

The present value of the interest subsidy is calculated at 6.50%, for a maximum tenure period of 20 years, on the maximum loan amount of Rs 6 lakhs. The future outflow of interest at 6.50% is discounted at 9% and the present value so arrived, is reduced from the actual loan amount taken by the borrower.

The amount of original loan reduced by the net present value of the subsidy benefit, is the liability of the borrower and the EMI is computed accordingly, based on the agreed rate of interest.

In case the borrower borrows more than Rs 6 lakhs, the amount of subsidy shall be restricted to an amount of Rs 6 lakhs and the additional loan shall be charged regular interest rates of the bank. Although the lender has to give the credit for the subsidy to the borrower immediately, the lender gets the amount of interest subsidy, only after the claim made by it is processed by the nodal agency with which it is registered. This is the main reason why lenders are not keen to promote this beneficial scheme of the government.

Under the scheme, the lenders have to register themselves with one of the nodal agencies – NHB or HUDCO. The lender institutions include various entities engaged in the business of providing home finance, such as scheduled banks, housing finance companies, regional rural banks (RRBs), state cooperative banks and urban cooperative banks. It will also include small finance banks and NBFC- micro finance institutions. Additionally, the government can notify other institutions, to be eligible to provide finance under this scheme.

See also: PMAY: How to check beneficiary list online

 

Steps in Credit Linked Subsidy Scheme for EWS/LIG

Source: MoHUA

 

Processing fee for loan applications under PMAY

Under the scheme, the lender is not allowed to recover any processing fee from the borrower. So, in addition to reimbursement of the subsidy amount, the lender will also be given a lump sum of Rs 3,000, to cover their cost of processing the loan application for an amount upto Rs 6 lakhs. For additional loan beyond Rs 6 lakhs, the lenders are allowed to recover normal processing fees.

 

Balance transfer under PMAY subsidy

Although the borrower is allowed to shift his existing home loan, under which the subsidy benefit has already been availed, the borrower shall not be entitled to claim the subsidy again on such balance transfer. Moreover, you cannot avail the benefit under this scheme, by transferring your existing home loan after the notified date, as the subsidy is only available to the borrower when he first acquires or constructs the house. The house to be purchased, need not be new. It can also be a resale house from another owner or a builder.

 

How to track PMAY subsidy status? 

Step 1: Log on to CLSS Awas Portal

Step 2: Mention the ‘Application ID’ that your lender has provided. This ID is sent within 24 hours of your lender submitting your application.

PMAY CLSS Subsidy tracker

 

Step 3: Verify your mobile number through an OTP.

Step 4: The system will display stages of the beneficiary’s application.

Also note: If the borrower/co-borrower are existing CLSS beneficiaries who have received subsidy amount in multiple disbursements, then CLSS tracker will display details of all past disbursements i.e. dates of disbursement and subsidy amounts.

See also: Our in-depth guide on how to use the PMAY CLSS tracker portal

 

Can you prepay the home loan if you received PMAY subsidy?

The PMAY subsidy that you have availed of, is applicable only if the loan is active for the entire period and hence, if you prepay some amount, the subsidy amount will be reversed and you will miss out on some part of the benefit.

 

Should you take a loan to prepay your home loan for the PMAY unit?

Now, suppose you are planning to take a home loan of Rs 10 lakhs and apply for the PMAY CLSS, hoping to prepay Rs 4 lakhs in the first year. Is that possible and should you do it? Once your PMAY subsidy is approved, your loan amount and therefore, the EMI burden, will also reduce. However, note that if your PMAY subsidy is on the entire loan amount, then, you will need to refund the present value of the subsidy that is availed of on the refunded amount for the remainder of the tenure.

However, if your loan (additional) is on the non-subsidised part of the same property, your repayment will be reduced from the non-subsidised part.

PMAY beneficiary
PMAY beneficiary/ Source: Twitter

 

Features of Credit Linked Subsidy Scheme for EWS/LIG

Details  LIG  EWS
Household annual income (Rs) Minimum: 0

Maximum: 3,00,000

Minimum: 3,00,001

Maximum: 6,00,000

Income proof for claiming subsidy Self declaration Self declaration
Property carpet area upto (sq metres)
30 60
Property location All statutory towns, as per Census 2011 and towns notified subsequently All statutory towns as per Census 2011 and towns notified subsequently
Applicability of no pucca house Not for renovation / upgradation Not for renovation / upgradation
Woman ownership / co-ownership Not for existing property. Required for new acquisition. Not for existing property. Required for new acquisition.
Due diligence process As per the process of the primary lending institution As per the process of the primary lending institution
Eligible loan amount As per the policy applied by the primary lending institution As per the policy applied by the primary lending institution
Identity proof  As specified As specified
Housing loan sanction and disbursement period From: June 17, 2015

To: As specified

From: June 17, 2015

To: As specified

Interest subsidy eligibility (Rs)
Loan amount

Maximum: 6,00,000

Loan amount

Maximum: 6,00,000

Maximum loan tenure
20 years 20 years
Interest subsidy (per cent, per annum) 6.50  6.50
NPV discount rate (%) 9 9
Maximum interest subsidy amount (Rs) 2,67,280 2,67,280
Loan category at the time of crediting the subsidy Standard asset Standard asset
Lumpsum amount paid as per sanctioned housing loan application (Rs)* 3,000 3,000
Quality of house / flat construction  National Building Code, BIS Codes and as per NDMA guidelines adopted National Building Code, BIS Codes and as per NDMA guidelines adopted
Approvals for the building design Compulsory Compulsory
Basic civic infrastructure (water, sanitation, sewerage, road, electricity, etc.) Compulsory Compulsory
Monitoring and reporting the completion of property construction Responsibility of the primary lending institution Responsibility of the primary lending institution
Default repayment of loan Recover and pay back subsidy to CNA on proportionate basis Recover and pay back subsidy to CNA on proportionate basis
Data submission and accuracy, and record keeping and maintenance Responsibility of the primary lending institution Responsibility of the primary lending institution

Source: MoHUA

 

Other conditions for EWS/LIG under PMAY

Condition Description 
PMAY and security to avail of the loan The property that is being financed will be under mortgage. Also, the collateral will be decided on a case-to-case basis.
Rate of interest  Interest subsidy is at the rate of 6.50% for the initial amount of Rs 6 lakhs. 
Repayment Maximum repayment term is up to 30 years. Interest subsidy is available only for 20 years.  

 

CLSS toll-free helpline numbers

NHB: 1800-11-3377,  1800-11-3388

HUDCO: 1800-11-6163

 

Quick facts about PMAY subsidy

  • The National Housing Bank (NHB) and Housing and Urban Development Corporation Limited (HUDCO), are the main agencies that operate the disbursal of subsidies.
  • An advance subsidy is disbursed at the beginning of the scheme by the centre. After 70% of this subsidy is utilised, the remainder of the amount will be released.
  • Primary lending institutions (PLIs) will need to enter into a MoU with HUDCO and NHB, in order to claim CLSS benefits.
  • Repair of existing houses and resale of new construction properties are also included in the fold of CLSS beneficiaries.

 

FAQs

How to apply for interest subsidy under PMAY?

If you are applying for interest subsidy under PMAY, your lender has to submit the application to the National Housing Bank.

How to check PMAY status?

You can check the PMAY status through CLSS Awas Portal by using your Application ID.

How much time it takes to get PMAY subsidy?

It takes 2-6 months to get interest subsidy in your loan account.

 

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