The government has come out with guidelines on interest rate subsidy scheme under Pradhan Mantri Awas Yojana (Urban) for middle-income groups. The scheme was earlier announced by Prime Minister Narendra Modi in his New Year’s Eve address to the nation. Middle income groups (MIG) with annual incomes of above Rs. 6 lakh and up to Rs. 18 lakh per year are eligible for interest subsidy on buying their first home under Pradhan Mantri Awas Yojana (Urban). The scheme has been named as Credit Linked Subsidy Scheme for Middle Income Groups – CLSS (MIG). Prime Minister Narendra Modi had announced interest subsidy of 4 per cent on housing loans of up to Rs.9 lakh for those with an income of Rs12 lakh per year and of 3 per cent subsidy on housing loans of up to Rs.12 lakh for those earning Rs. 18 lakh per year. Additional loans beyond the specified limit, if any, will be at non-subsidized rate. This home loan interest subsidy scheme is part of the government’s ‘Housing for All’ initiative. The scheme will be implemented initially for a period of one year.
Here are 10 highlights of the interest rate subsidy scheme under Pradhan Mantri Awas Yojana (Urban):
1) Home loans sanctioned or applications are under consideration since January 1, 2017, are eligible for interest subsidy under the Credit Linked Subsidy Scheme for Middle Income Groups. The beneficiary earlier should not have own a house in his/her name.
2) Interest subsidy will be provided on loans for construction/acquisition of house with carpet area of up to 90 sq metres for those with income of up to Rs. 12 lakh per year and of up to 110 square metres for those earning between Rs. 12 lakh and Rs. 18.00 lakh per year.
3) Under the scheme, the tenure of loan has been stipulated to be 20 years or that preferred by the beneficiary, whichever is lower.
4) Sriram Kalyanaraman, MD and CEO of National Housing Bank, said that interest subsidy of 4 per cent will bring down EMIs of beneficiaries by Rs. 2,062 per month on a housing loan of Rs. 9 lakh and interest subsidy of 3 per cent will bring down EMIs by Rs.2,019 on a loan of Rs.12 lakh, taking normal housing loan interest rate as 8.65 per cent.
5) The total interest subsidy accruing on these loan amounts will be paid to the beneficiaries up front in one go, thus reducing the burden of Equated Monthly Instalment (EMI).
6) The total interest subsidy for middle-income people over 20 years on Rs. 9 lakh loan and Rs. 12 lakh loan comes to around Rs. 2.30 lakh per beneficiary (the present value of interest subsidy provided to beneficiaries over the tenure of 20 year loan at a discounting rate of 9 per cent.)
7) Beneficiaries eligible for interest subsidy under the CLSS scheme have to apply to their lenders for availing the subsidy benefit.
8) 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.
9) 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.
10) 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.