Home Loan Subsidy in India

The Government of India, through the Ministry of Housing and Urban Affairs (MOHUA), launched the Pradhan Mantri Awas Yojana (PMAY) on June 25, 2015. The scheme aimed to ensure a pucca house for all eligible urban and rural households by 2022. The assessment and implementation of the program are done through local bodies such as state-level nodal agencies, Implementing agencies, Urban local bodies, etc., who compute the demand of the housing shortage in their respective zones. This scheme provides an opportunity for the citizens to avail of a home loan subsidy to purchase a property.

Features of the Home Loan Subsidy Under PMAY

The Pradhan Mantri Awas Yojana aims to provide home loan subsidies to eligible citizens in the country. This program entails the following features:

• Allotment of housing units that are fully equipped with water, electricity, and toilets.
• Provide adequate physical infrastructure for the inhabitants.
• Ensuring a better quality of life for the urban and rural poor.
• Provide housing security to the eligible availed of the scheme.
• The home loan subsidy to be allocated on the interest under the Credit Linked Subsidy Scheme
• The scheme also gives particular preference to the vulnerable sections of society such as senior citizens, differently-abled individuals, minorities, SCs, STs, and OBCs.

PMAY- Home Loan Subsidy Schemes

The Pradhan Mantri Awas Yojana is a home loan subsidy scheme that aims to stimulate the affordability of houses in the country and cater to the humongous housing requirements. As the price of the real estate sector continues to soar throughout the country, the scheme’s beneficiaries can avail of the subsidized interest rates provided by the Government. The scheme is segmented into the Urban and Grahmin wings to provide a roof to the citizens throughout the country. This home loan subsidy scheme strives to construct 20 million homes across India.

Pradhan Mantri Awas Yojana- Urban (PMAY-U)

Currently, the scheme envelops around 4,331 towns and cities in the country. The scheme covers all the urban planning and regulation boards, such as the urban development authority, industrial development authority, and notified planning. The scheme was designed to be implemented in three phases:

• In phase 1 will cover 100 cities in the shortlisted States and Union Territories from 2015 to 2017.
• In the second phase, the scheme will add 200 cities from 2017 to 2019.
• The third phase will cover all the remaining cities by March 2022.

The Central Sanctioning and Monitoring Committee announced that the Government of India approved the construction of 1.68 Lakhs housing projects at their 52nd meeting on January 20, 2021. An amount of Rs 4,95,838 crores has been allocated to the scheme.

Pradhan Mantri Awas Yojana- Gramin (PMAY-G)

As the name suggests, the Pradhan Mantri Awas Grahmin Yojana was launched to stimulate the accessibility and affordability of housing projects in rural areas specifically for the impoverished. The scheme provided financial aid to the homeless and assistance to construct pucca houses for citizens in rural areas who inhabited deteriorating houses. The eligible beneficiaries can receive up to Rs 1.2 Lakhs, and the rural population residing in hilly areas can receive up to Rs 1.3 Lakhs. The government will bore the cost incurred in the construction of houses in rural areas in the following ratios:

• Plain Regions – 60:40
• North-East and Hilly Terrains: 90:10.

The Government of India has sanctioned around 1,03,01,107 houses in every state and Union Territories according to the data provided by the Ministry of Rural Development.

The Pradhan Mantri Awas Yojana Components

The Pradhan Mantri Aawas Yojana was launched to provide affordable housing through home loan subsidies to eligible citizens.

Credit Linked Subsidy Schemes

The eligible citizens can avail of the home loan subsidy on interest provided by the Government of India under the Pradhan Mantri Awas Yojana. The following groups can avail of subsidized interest rates on their purchase of property:

Economically Weaker Section (EWS) or Low Income Group (LIG)

 The individual who falls under this group can avail of the subsidized interest rates on their home loan up to 6.5%. The borrower can avail of a loan of up to Rs 6 Lakhs on such subsidized rates. The home loan subsidy on interest is provided for the tenure or fifteen years (whichever is lower).

Revised Economically Weaker Section (EWS) or Low Income Group (LIG)

The eligible individual can avail home loan subsidy on interest up to 6.5%. According to the revised rules, they can avail of the maximum home loan subsidy amount of Rs 2.67 Lakhs for the loan tenure of 20 years.

Middle Income Group (MIG-1)

The eligible applicants who fall under the MIG-1 segment can avail of a home loan subsidy of 4% per annum. The maximum tenure determined for the loan is 20 years.

Middle Income Group (MIG-2)

 The applicant who features under the MIG-2 group at a subsidized interest rate of 3% for up to Rs 12 Lakhs. The maximum subsidy amount is set at Rs 2.3 Lakhs, and the maximum tenure for the loan is 20 years.

*The details mentioned above are subject to change as per the discretion of the Government of India.

‘In-Situ’ Slum Redevelopment (ISSR)

The government aims to redevelop slums with the help of private developers; assistance of Rs 1,00,000 is provided to any city dwellers eligible to avail of the home loan subsidy scheme. The scheme is facilitated to cater to the housing requirements by utilizing the land as a resource component.

Affordable Housing In Partnership (AHP)

The citizens falling under the EWS category can avail of financial assistance from the central government up to 1.5 Lakhs to obtain a property. The development of such housing projects is overseen by State Governments and Union Territories with the help of private developers.

Individual House Construction/enhancement- Beneficiary Led

This is availed of by EWS families who cannot avail of the abovementioned benefits. They enhance and renovate their existing property with the financial assistance of Rs 1.5 Lakhs offered by the Central Government.

Home Loan Subsidy Benefits

The home loan subsidy provided by the government offers the following benefits to its users:

• The citizen can avail of home loan subsidy on interest rates for home loans till the maximum subsidy amount.
• The home loan subsidy simultaneously reduces the EMIs and principal as the subsidy amount is transferred directly to the beneficiary’s bank account under this scheme.
• The tenure on a loan is up to 20 years, which can reduce the burden of EMIs, making it more manageable.
• There is no cap on the maximum loan amount that could have been availed of. If the home loan amount precedes the specified limit, then standard interest rates will be applicable.
• Under the Income Tax Act, 1961, the beneficiary of the scheme is eligible to avail of various tax benefits.

Eligibility to Avail of Home Loan Subsidy

The eligibility criteria set by the Government of India to avail of the home subsidy are as follows:

• Individuals shall not own a Pucca House throughout the country. As this scheme is specifically designed for first-time home buyers.
• The household’s income shall not exceed Rs 18 Lakhs per year.
• The beneficiary who has accessed government funds under any other housing scheme from the government is not eligible to apply again.
• It is mandatory to feature a name of a female in the family in the deed or property papers. A provision for joint ownership is also provided.
• In case the beneficiary has received the amount to reconstruct or renovate their existing home. They must finish the upgradation within 36 months from the disbursal date.