Subsidised Home Loans Under PMAY – A Relief For Middle-Income Customers

To promote the idea of affordable ‘housing for all’, the Central Government introduced Pradhan Mantri Awas Yojana or PMAY in June 2015. Given the perennial shortage of affordable housing in India, the measure is still rated as a positive step forward towards the resolution of such issues.

The ambitious plan was to develop affordable housing under the scheme by 2022. In fact, recent figures show that a lot of progress has been made. In 2015, PMAY was first announced along with a target of building 54.95 Lakh houses by 2019. Around 15% of that number was finished by late 2018.

The scope of the program has also been widened. The Pradhan Mantri Awas Yojana 2019 scheme now covers middle and lower-income groups as well.

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Also, the quantum of Pradhan Mantri Awas Yojana loan in urban areas has been increased to Rs. 12 Lakh.

Previously, citizens of the country who wanted to build their own homes had to apply for a home loan. Thanks to the PMAY scheme, more people can now avail such a loan via this scheme and afford basic living standards.

Key Aspects of PMAY

The Indian Constitution defines the country as a welfare state, meaning that the Government works for the benefit of its citizens. The PMAY is a key step in that direction.

When it was first conceived, there were 4 critical aspects. They are still the same.

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  1. Redevelopment of slum areas – To redevelop slum areas by providing easy and affordable housing loans for everyone who dwell in such areas. Urban slums are a reality in India, which is just what this scheme aims to eliminate.
  2. CLSS – For middle and lower income groups, the Government will also provide credit-linked subsidy on any loan taken to build new homes. You can also redevelop or renovate existing homes. Thus, for loans between Rs. 6 Lakh and Rs. 12 Lakh, an interest subsidy of 3% to 6.5% is available. The drastic drop in interest rates has led to a boom in the demand for housing loans. In case you are a subscriber to the scheme, you can check your own payable EMI amount using a housing loan EMI calculator.
  3. Income group – The Government has also identified certain vulnerable segments of the population and declared them Economically Backward Sections or EWS. If you are from the EWS background, with an annual income of less than Rs. 3 Lakh per annum, and qualify all the PMAY eligibility criteria, the Government will offer financial assistance to help you build your own home. This assistance will be co-subsidised by the respective states and Union Territories. Finally, all eligible citizens from Economically Weaker Sections will receive a direct financial assistance of Rs 1.5 Lakh.

Importance of PMAY Subsidy

Most studies agree on the fact that given the population growth in India, an affordable housing program was the need of the hour. An estimated 20 million people in India are in urgent need of homes but are unable to apply for a home loan due to the higher home loan interest rates.

But with the PMAY scheme lending a helping hand, most potential home buyers are now approaching financial institutions to avail a loan. PMAY helps reduce housing loan EMI rates too. Most leading NBFCs like Bajaj Finserv offer a home loan at interest rates under 7% thanks to the PMAY subsidy.

Note that there are a lot of home loan eligibility criteria which must be fulfilled. You can use a home loan eligibility calculator before you approach a financial institution for a loan.

The Government expects that its ‘housing for all’ program will soon bear fruit. A number of unsold residences priced at over Rs. 50 Lakh are static in urban cities. The PMAY scheme may prove to be a boost to the real-estate segment.

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