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12 Vital Aspects of the Pradhan Mantri Awas Yojana (Urban) Scheme


Under the recently announced Pradhan Mantri Awas Yojana Scheme, there is a Credit Linked Subsidy Scheme for Middle Income Groups (CLSS-MIG). In this urban scheme, MIGs with annual incomes ranging from 6 lakhs INR to 18 lakhs INR per annum are eligible for a subsidy in interest rates for purchasing their first home.

The scheme is expected to augment the housing sector if real estate developers are ready to provide compact spaces at lower prices, like the builders with flats in Tambaram specifically constructing units to deliver for this purpose.

The subsidy scheme on home loan interests is a part of the “Housing for All” initiative. In this scheme, there is a 4% subsidy on interest rates for home loans up to 9 lakhs INR for the MIGs falling under the 12 lakhs INR per annum income and a 3% subsidy on interest rates for home loans up to 12 lakhs INR for MIGs with an income of 18 lakhs INR per annum.

Additional loans over the limit can only be availed at the usual rate without the subsidy. Initially, the scheme is planned to be put into practice for a one year period.

Things to know about the Pradhan Mantri Awas Yojana (urban) scheme:

1,  Middle Income Group beneficiaries entitled for subsidy in interest from the Credit Linked Subsidy Scheme (CLSS) should apply to their respective loaner to avail the necessary benefit. Sanctioned home loans and applications are being considered since the beginning of the year, i.e. 1st of January 2017.

2,  The beneficiary who wants to avail this scheme should not possess a house in his/her name in any part of the country. For example, if the beneficiary wants to avail this scheme to buy one of the flats for sale in Tambaram, Chennai, then he/she should not have any house in his/her name in any other place in the country.

3,  Apart from commercial banks- urban & state cooperative banks, home finance companies, rural banks, small finance banks and micro finance companies are also allowed to lend this subsidised loan amount to a beneficiary in this scheme.

4,  The amount of interest subsidy given to a beneficiary by the loaners is reimbursed by the National Housing Bank and the Housing & Urban Development Corporation.

5,  No processing charges or fees of any sorts are levied by the loaners from the borrowing beneficiaries.

6,  Unlike any other scheme, to eliminate the complications of Equated Monthly Instalments, the total subsidised interest amount on the loan is provided to the beneficiary up front at once.

7,  For beneficiaries with annual income of up to INR 12 lakhs, an interest subsidy will be given on loans for acquisition or construction of home with a carpet area of 90 square metres.

8,  For beneficiaries with annual income of up to INR 12 lakhs to INR 18 lakhs, an interest subsidy will be given on loans for acquisition or construction of home with a carpet area of 110 square metres.

9,  The time period of the loan is 20 years or a lower time period favoured by the beneficiary in discussion, whichever is lesser.

10,  With a 4% subsidy in interest rates for the home loan, the beneficiary is expected to enjoy a reduction of INR 2,062 each month on the Equated Monthly Instalment for a home loan of INR 9 lakhs. For this calculation, the normal home loan interest rate for reference is considered as 8.65%.

11,  With a 3% subsidy in interest rates for the home loan, the beneficiary is expected to enjoy a reduction of INR 2,019 each month on the Equated Monthly Instalment for a home loan of INR 12 lakhs. For this calculation, the normal home loan interest rate for reference is considered as 8.65%.

12,  Thus, the total subsidy in interest rates for MIGs on INR 9 lakhs and INR 12 lakhs loan amount over a time of 20 years comes around INR 2.30 lakhs at a 9% discount in rate for calculation reference. 

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