23 Mar, 2017 7:22p.m.

Interest subsidy on home loans for Middle Income Groups under Pradhan Mantri Awas Yojana

The government has come up with the guidelines related to the Pradhan Mantri Awas Yojana (Urban).

This interest subsidy scheme has been named as 'Credit Linked Subsidy Scheme for Middle Income Groups - CLSS(MIG)'.

According to the Credit Linked Subsidy, which is a part of the PMAY scheme, middle-income groups with incomes in the eligible range will get an interest rate subsidy of 3-4 per cent.
Initially, the scheme will be implemented for a period of one year.

Here are the points
  • People whose annual incomes of above Rs 6 lakhs to Rs 18 lakhs are eligible for the scheme
  • People whose housing loans have been approved and whose applications are under consideration since January 1,2017 are also eligible for it.
  • Under the guidelines, preference is to be given to women. Widows, single working-women, persons belonging to scheduled castes and scheduled tribes, backward classes, differently abled and transgender people will be given preference.
  • Interest subsidy of four per cent on housing loans of up to Rs 9 lakhs for people with an annual income of Rs 12 lakh. For those earning Rs 18 lakh per year, they are eligible for three per cent subsidy on housing loans of up to Rs 12 lakh.
  • For the eligibility the maximum tenure of loan has to be 20 years or lower
  • The total interest subsidy accruing on these loan amounts will be paid to the beneficiaries up front in one go which would reduce the burden of EMI on the user.
  • The scheme  will bring down EMIs of beneficiaries by Rs 2,062 per month on a housing loan of Rs 9 lakh and interest subsidy of three per cent would lower the EMI by Rs 2,019 on a loan of Rs 12 lakh, taking normal housing loan interest rate as 8.65 per cent.
  • The total interest subsidy to be paid under MIG group for loan up to Rs 9 lakh is Rs 2.35 lakh and on a loan of Rs 12 lakh, it comes to Rs 2.30 lakh per beneficiary.
  • Beneficiaries eligible for interest subsidy under the CLSS scheme have to apply to their lenders for availing the subsidy benefit.
  • National Housing Bank (NHB) and Housing and Urban Development Corporation (HUDCO) will reimburse interest subsidy to the lenders. No extra processing fee will be charged by the lenders from borrowers.
  • Besides commercial banks, housing finance companies, regional rural banks, state and urban cooperative banks, other financial institutions like small finance banks and non-banking finance company-micro finance institutions can also lend under this scheme.
  • 70 lending institutions including 45 housing finance companies, 15 scheduled banks, 2 regional rural banks, 1 cooperative bank, 4 small finance banks and 3 non-banking finance companies-micro finance institutions on Wednesday signed an agreement with National Housing Bank (NHB) for implementation of the scheme. Kotak Institutional Equities in a note said that the scheme will give a boost to the housing sector provided real estate players offer compact products at lower ticket sizes. This scheme will help bring down overall interest cost for home loan borrowers, the brokerage added.

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