Owning a home is the dream of millions of Indians. As per the 2011 census, there were 331 million houses in India comprising 221million rural homes and 110 million urban homes. Based on information gathered from various sources including the census, housing experts determined that the housing shortage was 62 million (43 million rural and 19 million urban homes) in 2012.
Up to the year 2022, the sources estimated that about 29 million urban houses and about 25 million rural houses needed to be built additionally. Thus, including the shortage the total number of houses required to be built by the year 2022 is estimated to be about 116 million.
Out of this, the Economically weaker section (EWS) and Lower income group (LIG) segment formed the major portion of required housing. Perhaps, taking cognizance of the housing shortage and realizing the difficulty in securing funds for purchase of homes especially for the EWS of society the governments devised various schemes to help ease the availability of home loans through interest subsidies. One such initiative is the Pradhan Mantri Awas Yojana (PMAY). Since the introduction of PMAY, there is a considerable reduction in the urban housing shortage to about 10 million houses now.
What is PMAY?
In essence, PMAY is an interest subsidy scheme introduced for the benefit of the economically weaker sections of society. The main features of PMAY include:
Category of beneficiaries
The category of beneficiaries include
- EWS – People earning income under Rs 3 lakh per annum
- LIG – People earning income between Rs 3 lakh and Rs 6 lakh per annum
- MIG-1 – People earning income between Rs 6 lakh and Rs 12 lakh per annum
- MIG-2 – People earning income between Rs 12 lakh and Rs 18 lakh per annum
Interest rate subsidy
The interest rate subsidy is as follows:
- EWS and LIG – 6.5%; maximum interest subsidy amount capped at Rs 2.67 lakh for a maximum eligible loan amount of Rs 6 lakh
- MIG-1 – 4%; maximum interest subsidy amount capped at Rs 2.67 lakh for a maximum eligible loan amount of Rs 9 lakh
- MIG-2 – 3%; maximum interest subsidy amount capped at Rs 2.67 lakh for a maximum eligible loan amount of Rs 12 lakh
There is no bar on the amount of loan a beneficiary can take but the interest subsidy amounts are limited to the maximum home loan amounts specified above. The maximum subsidies are calculated on the basis of availing the maximum loan amounts for each category for a tenure of 20 years and an interest rate of 9%.
Maximum Dwelling Carpet Area
The scheme specifies the maximum dwelling area allowed for the interest subsidy scheme and they are:
- EWS – 30 sq. m
- LIG – 60 sq. m
- MIG-1 – 160 sq. m
- MIG-2 – 200 sq. m
There are many other features that beneficiaries need to know and among others they include:
- The scheme is applicable to people with Aadhaar card
- Senior citizens and differently-abled persons get priority treatment
- The scheme is applicable only to first-time owners and new constructions. However, extension and repair of semi-pucca/kuccha house is eligible
- The new home has to have a woman as a sole or joint owner with some exceptions
- The scheme is available for home loans taken from financial institutions including housing finance companies and NBFCs
- The government can from time to time offer additional benefits and include other categories of beneficiaries
How to apply
Intended beneficiaries need to apply for the PMAY interest subsidy scheme to avail the benefits of the scheme. Typically, Tata Capital or other lenders will help you to apply for the scheme. You need to tell the lender about your interest in availing the PMAY scheme. It would take you through the process and ascertain your eligibility based on the information and documents you furnish. Subsequently, if everything is in order, it would send your application to the nodal agency earmarked for your territory. Based on your application and if everything is in order the nodal agency would disburse the subsidy amount upfront to Tata Capital. Tata Capital, in turn, would credit to your loan account and reduce the sanctioned/availed loan amount by the amount of subsidy received. The main advantage of PMAY is that the full amount of subsidy is paid upfront much before the completion of the house. This has the effect of reducing your total loan amount by the amount of subsidy received.
The scheme is being implemented keeping in mind the requirement of these sections of society. The government has been proactive as well as reactive to sensibilities of people and has taken necessary steps to implement the scheme to benefit the home buyers.
You can visit Tata Capital’s website and get details on home loans and the way to apply for the PMAY scheme.