PMAY: 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

The government has been trying to support the cause of housing, through its ‘Housing for All by 2022’ mission. Under this mission, the government has come out with two schemes, to partly fund the interest of the borrowers in urban areas. The first scheme, which is very liberal in terms of the interest rate subsidy, is applicable to the Economically Weaker Sections (EWS) and those under the Low-Income Group (LIG). The other scheme covers the Middle-Income Group (MIG). Let us discuss the first scheme in detail.

 

Eligibility criteria in PMAY

The eligible category is divided into two parts – the first category is EWS and the other category is 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 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:

ParticularsEWSLIG
Annual family incomeUpto Rs 3 lakhsAbove Rs 3 lakhs and upto Rs 6 lakhs
House areaCarpet area upto 30 sq metresCarpet area upto 60 sq metres
Rate of interest subsidy6.50%6.50%
Maximum loan eligible for subsidyRs 6 lakhsRs 6 lakhs
Maximum loan tenure20 years20 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.

 

How is the subsidy under PMAY 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

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.

 

Can you prepay the home loan if you received a 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 subsidySelf declarationSelf declaration
Property carpet area upto (sq metres)
3060
Property locationAll statutory towns, as per Census 2011 and towns notified subsequentlyAll statutory towns as per Census 2011 and towns notified subsequently
Applicability of no pucca houseNot for renovation / upgradationNot for renovation / upgradation
Woman ownership / co-ownershipNot for existing property. Required for new acquisition.Not for existing property. Required for new acquisition.
Due diligence processAs per the process of the primary lending institutionAs per the process of the primary lending institution
Eligible loan amountAs per the policy applied by the primary lending institutionAs per the policy applied by the primary lending institution
Identity proof As specifiedAs specified
Housing loan sanction and disbursement periodFrom: 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 years20 years
Interest subsidy (per cent, per annum)6.50 6.50
NPV discount rate (%)99
Maximum interest subsidy amount (Rs)2,67,2802,67,280
Loan category at the time of crediting the subsidyStandard assetStandard asset
Lumpsum amount paid as per sanctioned housing loan application (Rs)*3,0003,000
Quality of house / flat construction National Building Code, BIS Codes and as per NDMA guidelines adoptedNational Building Code, BIS Codes and as per NDMA guidelines adopted
Approvals for the building designCompulsoryCompulsory
Basic civic infrastructure (water, sanitation, sewerage, road, electricity, etc.)CompulsoryCompulsory
Monitoring and reporting the completion of property constructionResponsibility of the primary lending institutionResponsibility of the primary lending institution
Default repayment of loanRecover and pay back subsidy to CNA on proportionate basisRecover and pay back subsidy to CNA on proportionate basis
Data submission and accuracy, and record keeping and maintenanceResponsibility of the primary lending institutionResponsibility of the primary lending institution

Source: MoHUA

 

Other conditions for EWS/LIG under PMAY

ConditionDescription 
PMAY and security to avail of the loanThe 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. 
RepaymentMaximum 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 home loan 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.

 

Challenges to PMAY

Atul Monga, CEO of BASIC Home Loan, believes that the beneficiaries eligible for the PMAY, should get the benefits by default, instead of going through the process of filling another application with the lender.

Even though the government extended the tax benefits for the affordable housing segment in the recent Budget, over 46% of the existing home buyers in this category were found ignorant of the Pradhan Mantri Awas Yojana (PMAY) scheme, revealed the findings of BASIC Home Loan’s survey to gauge the home buyers’ understanding of the PMAY. The awareness survey included over 1,000 affordable housing loan customers who availed of finance in the last nine months.

Under 17% of respondents were found to be aware of Rs 2.67 lakhs being the maximum subsidy amount available under PMAY. Even the issue of mandatory women’s ownership to avail of the PMAY benefits lacked clarity. Only 48% of the respondents knew that EWS and LIG home buyers are priority consumers covered under this.

The maximum loan tenure of 20 years under the PMAY was misunderstood, with almost half the respondents of the survey believing that it stood at 30 years. Only 37% of the participants answered this question accurately.

 

PMAY latest updates

Haryana government spent Rs 9,858.26 lakhs on PMAY

The Haryana government has sent Rs 9,858.26 lakhs (Rs 98.5826 crores) directly to the accounts of EWS people, for construction of houses under the PMAY during 2020-21, said the state’s agriculture and farmers’ welfare minister JP Dalal. So far, 11,267 houses have been constructed under the PMAY scheme, during the financial year 2020-21.

The target was set to construct 21,502 houses in the rural and urban areas, for the families belonging to the EWS category but the target has not been met so far.

(The author is a tax and investment expert, with 35 years’ experience)

(With inputs from Sneha Sharon Mammen)

 


PMAY news updates

Move to relax ECB norms for PMAY expected to benefit home buyers and developers

Update on September 17, 2019: Finance minister Nirmala Sitharaman on September 14, 2019, rolled out some good news for affordable home builders and buyers. Government funds to the tune of Rs 10,000 crores will be made available for affordable and mid-segment projects that are battling a liquidity crunch. However, she also said that the funds will be extended to those projects that do not have any pending cases under the National Company Law Tribunal (NCLT) or Non Performing Assets (NPA) cases. This will act as a last-mile funding for housing projects that are stuck. 

Apart from this, guidelines for External Commercial Borrowings (ECB) will also be relaxed to help PMAY homebuyers. This will also greatly help builders who are looking at funds from overseas investors. All of this will be done in consultation with the Reserve Bank of India.

Ujjawala, Ayushman Bharat schemes to be extended to PMAY (U) beneficiaries

Update on August 30, 2019: The Union Housing and Urban Affairs Ministry, on August 29, 2019, launched the ‘Angikaar campaign’, a move aimed at bringing the beneficiaries of the PMAY (Urban) into the fold of other central schemes such as Ujjawala and Ayushman Bharat. Union Housing and Urban Affairs Minister Hardeep Singh Puri said the convergence would especially focus on Ujjwala for gas connection and Ayushman Bharat for health insurance, to the beneficiaries of Pradhan Mantri Awas Yojana (U). HUA secretary Durga Shanker Mishra said the campaign will officially be rolled out in all cities with PMAY (U), on October 2, 2019 and culminate on December 10.


 

Update on July 5, 2019: In the Union Budget 2019-20, finance minister Nirmala Sitharaman announced that over 81 lakh houses have been sanctioned, out of which construction has been completed for 26 lakh houses under the PMAY Urban. Similarly, 1.5 crore rural homes have been completed over 5 years under the PMAY-G. In the second phase 1.95 crore houses will be built by 2022.

An additional deduction of Rs 1.5 lakhs on interest, for loans borrowed upto March 31, 2020, for affordable houses (purchase of house up to Rs 45 lakhs), will also be given.

“In order to align the definition of affordable housing in the Income-Tax Act with the GST Act, it is proposed to increase the limit of carpet area from 30 sq m to 60 sq m in metropolitan regions and from 60 sq m to 90 sq m in non-metropolitan regions. It is also proposed to provide the limit on cost of the house at Rs 45 lakhs, in line with the definition in the GST Act,” the Budget statement said.

Update on July 4, 2019:

Demand made in RS to increase size of ‘pucca’ homes under PMAY

A demand was made in the Rajya Sabha, on July 3, 2019, to increase the size of ‘pucca’ homes being constructed under the Pradhan Mantri Awas Yojana (PMAY). The demand was made by BJP MP from Gujarat, CK Gohel. To this, the government said the scheme was being implemented in consultation with state governments. “Under the scheme, the prescribed size is 30 sq metre pucca home, with a toilet and kitchen, etc. If there are suggestions, the state government can provide,” housing and urban affairs minister Hardeep Singh Puri said, during the Question Hour in the upper house.

On another query raised by NCP MP from Maharashtra Majeed Memon, on the number of slums constructed under the PMAY in Mumbai, the minister said details will be conveyed to him separately. He said 83 lakh slums have been constructed so far under the scheme, against the target of 1 crore. The centre has figures state-wise and not city-wise.

(With inputs from PTI)

 


Update on July 1, 2019:

No proposal to increase amount provided under PMAY: Rural development minister

The government has no proposal to increase the amount provided under the Pradhan Mantri Awas Yojana (PMAY), minister for rural development Narendra Singh Tomar, informed the Rajya Sabha, on June 28, 2019. “We have recently restructured this scheme and we are providing upto Rs 1.5 lakhs for construction of each house. There is no proposal to increase the amount as of now,” the minister told the house.

See also: PMAY: Over Rs 8,300 crores in subsidy disbursed to 3.77 lakh home buyers

(With inputs from PTI)

 


Update on June 28, 2019:

Persons with disabilities to get priority under PMAY: Maharashtra CM 

Maharashtra chief minister Devendra Fadnavis, on June 27, 2019, said his government was committed to the welfare of divyangs or persons with disabilities and assured they will be given priority, in the allocation of houses under the Pradhan Mantri Awas Yojana (PMAY). He said, “We want divyangs to get homes on a priority basis. We are working in this direction.”

See also: Odisha seeks 5 lakh PMAY houses for cyclone Fani-hit people

The state government allocated Rs 7,197 crores to the housing department, in its budget presented on June 19, 2019.

(With inputs from PTI)

 

 

Update on February 26, 2019: The centre has approved the construction of 5.6 lakh more houses under the Pradhan Mantri Awas Yojana (Urban) scheme, with Uttar Pradesh being sanctioned 1,79,215 houses, followed by Andhra Pradesh (1,10,618), Maharashtra (1,01,220) and Karnataka (48,729), among others. The cumulative number of houses sanctioned under the PMAY (U) now is 79,04,674.

The statement stated that a total of 1,243 projects with a project cost of Rs 33,873 crores, with central assistance of Rs 8,404 crores, had been approved in the meeting. Fifteen lakh houses have so far been completed. More than 12 lakh houses are currently being constructed.

Update on February 6, 2019: Union housing and urban affairs minister Hardeep Singh Puri has revealed that since the Credit Linked Subsidy Scheme (CLSS) was launched in June 2015  under the Pradhan Mantri Awas Yojana (Urban), Rs 8,378.15 crores have been disbursed to 3,77,022 home buyers. According to official data, Gujarat has topped the list of subsidies being disbursed under the CLSS, at Rs 2,683.63 crores, followed by Maharashtra (Rs 2,356.44 crores), Uttar Pradesh (Rs 494.20 crores) and Madhya Pradesh (Rs 461.20 crores).

Update on February 5, 2019: In the interim budget presented on February 1, 2019, the Housing and Urban Affairs Ministry’s budgetary provisions have been pegged at Rs 48,000 crores, a hike of 17 per cent over 2018-19. The ministry’s ambitious The Pradhan Mantri Awas Yojana (Urban) scheme, has been increased by five per cent, to Rs 6,853.26 crores, as against Rs 6,505 crores in union budget 2018-19.

Update on January 14, 2019: Union minister Hardeep Singh Puri has launched the Global Housing Technology Challenge (GHTC) among stakeholders, a move aimed at introducing the best technologies that seek to construct houses in a shorter period of time, with a lower cost.

Update on December 31, 2018: The Centre has extended the Credit Link Subsidy Scheme (CLSS) on home loans for the middle income group (MIG) under the Pradhan Mantri Awas Yojana (Urban) till March 2020, union housing and urban affairs minister Hardeep Singh Puri announced, on December 31, 2018. The CLSS for the MIG, was originally launched for 12 months till December 31, 2017. Under the CLSS, the MIG beneficiaries with an annual income of above Rs six lakhs and up to Rs 12 lakhs, would get an interest subsidy of four per cent on a 20-year loan component of Rs nine lakhs. Those with an annual income exceeding Rs 12 lakhs and up to Rs 18 lakhs, would get interest subsidy of three per cent.

(With inputs from PTI)

 

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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