Pradhan Mantri Awas Yojana Scheme for Middle Income Group

Updated on November 29, 20185 mins read

Update: June 2018 – Home loan subsidy of Rs.2.3 Lakhs under PMAY schemed is now extended. Whats more, the Government has also enhanced eligible carpet area for this scheme. Here is an updated post.

Buying or building a house in the city can be quite a daunting task. Space and proximity come at a high cost. For a lot of working professionals, EMI for a good house could very well take up most of their monthly income. In a time like this, If your income has not yet crossed 18 Lakhs a year, here’s an option that could save you a few lakhs – Pradhan Mantri Awas Yojana PMAY (Urban). The specific scheme is called Credit Linked Subsidy Scheme for middle income group. The Pradhan Mantri Awas Yojana guideline for ‘CLSS middle income group’ are very different from ‘ Pradhan Mantri Awas Yojana for CLSS EWS/LIG’ (Economically Weaker Section/ Lower Income Group). CLSS MIG offers a subsidy is 3-4% per annum. So effectively, your home loan would cost only 5.65% – 4.65% per year. Since the intent for this scheme was to provide basic affordable housing units, the Government has fixed an upper limit for the amount of loan so eligible.

CREDIT LINKED SUBSIDY SCHEME FOR MIDDLE INCOME GROUP

 MIG IMIG II
Annual household income Rs.6-12 LakhsRs.12-18 Lakhs
Maximum loan value for subsidy 9 Lakhs12 Lakhs
Processing feesNILNIL
Maximum loan tenure20 years20 Years
Subsidy on interest4%3%
Maximum interest subsidy2.35 Lakhs2.3 Lakhs
Maximum carpet area eligible 160 Sq Mtr (~1722 Sq Ft)200 Sq Mtr (~2153 Sq Ft)
Scheme open for application till ExtendedExtended

AM I ELIGIBLE FOR PRADHAN MANTRI AWAS YOJANA Practically most young working professionals can apply for loan under this scheme, subject to the following:

  • You can only apply for loan if you don’t own a pucca house anywhere already
  • Combined income of those applying should not be more than Rs.18 Lakhs a year
  • Who can apply
    • A household (family)with combined income less than 18 Lakhs a year
    • A single working individual (man/woman/transgender) with income less than Rs.18 Lakhs a year
    • Married couple with combined income less than Rs.18 Lakhs a year
    • Married couple with combined income less than Rs.18 Lakhs and living with parents, where parents own the house.

For CLSS (MIG) it is not mandatory to have a female co- applicant or owner. HOW DO I APPLY FOR PRADHAN MANTRI AWAS YOJANA If your household income is above Rs.50,000 per month, you have to apply for this scheme only through your bank. If you want to find out more, extensive details of the scheme are available on Pradhan Mantri Awas Yojana online website

   pradhan mantri awas yojana schemeSTEPS TO APPLY FOR HOME LOAN UNDER PRADHAN MANTRI AWAS YOJANA

  1. Select a bank that offers loan under Pradhan Mantri Awas Yojana
  2. Apply for home loan
  3. Inform the bank that you want to avail benefit under Pradhan Mantri Awas Yojana CLSS middle income group
  4. Submit documents for loan application
  5. Submit a letter declaring that you do not own a pucca house prior to the loan

  pradhan mantri awas yojana scheme HOW IS HOME LOAN INTEREST SUBSIDY CALCULATED The subsidy for this scheme is calculated by adding up all money you would save on EMI over 20 years. But we can’t take this amount as it is. Money in hand has more value today than in future. To account for this, we have to discount the total subsidy (using a rate of discount of 9% pa as stipulated by Government)  to get an accurate value. We can do this using a formula called NPV – Net Present Value. Here’s an example Radhika earns Rs. 12 Lakhs a year. She is eligible for loan of Rs.9 Lakhs and an interest subsidy of 4% per year.Her EMIs before and after subsidy would be as follows:

 Before subsidy After Subsidy
Loan value 9 Lakhs9 Lakhs
Interest rate 8.40%4.40%
Tenure 20 years20 years
Equated monthly installments (EMI)7,753.545,645.38
Monthly EMI saved2,108.16

So Radhika would save Rs. 2,108.16 every month for the next 20 years. The present value of this amount using a discount rate of 9% pa comes to Rs. 2,20,187. This is the lump sum subsidy.Maximum subsidy the government will pay is Rs. 2,30,000. A calculator is available on the official website here. HOW IS INTEREST SUBSIDY PAID The Government is channelising the scheme through two nodal agencies – NHB (National Housing Board) and HUDCO (Housing and Urban Development Corporation ltd) Any lending institution would need to sign an MOU with one of these agencies to offer loans under CLSS scheme. Many banks, cooperative banks, housing finance companies, micro finance companies have signed up already. The official list of banks, housing finance companies who can offer loan under the scheme, is available here. Private websites have also created such a list for your reference. Perhaps the most interesting feature of this scheme is that the government will be paying cumulative subsidy for 20 years in advance. That means, for a loan of 12 lakhs, you would get paid 2.3 Lakhs as soon as you take the loan. The bank will then deduct this subsidy amount from your loan value and calculate interest only on the balance. pradhan mantri awas yojana scheme HOW MUCH LOAN CAN I TAKE UNDER PRADHAN MANTRI AWAS YOJANA You are free to take a home loan for any amount you need. But the benefit of subsidy will be available only up to 12 lacs (for MIG II & 9Lakhs for MIG I). Interest on the balance loan value will be calculated at prevailing market rate. By taking this route, you could save about 2-3 Lakhs on a home loan of 50 Lakhs. Let’s see the numbers: SCENARIO I – If you take a regular home loan of 50 Lakhs

ParticularsAmount
Loan value50 Lakhs
Interest rate8.40%
Tenure20 years
Equated monthly installments (EMI)43,075.22
Total interest paid over 20 years53.38 Lakhs

SCENARIO II – If you take a loan for the same amount i.e Rs. 50 Lakhs under CLSS scheme. The first 12 lakhs of loan would get you an upfront subsidy of Rs.2.3 Lakhs. This amount would be credited to your loan account. On the balance, EMI would be calculated as usual at normal interest rate.

ParticularsAmount
Original loan value50 Lakhs
Reduced loan value after deducting lump sum subsidy Rs.2.3 Lakhs47.70 Lakhs
Interest rate8.40%
Tenure20 years
Final Equated monthly installments (EMI)41,093.76
Interest paid over 20 years50.92 Lakhs

So for the same loan value, you could save interest of about 2.46 Lakhs. Added to this, you would also benefit from tax brake on home loan. Important points to note

  • Loans sanctioned and applications in process since 1st January 2017 are eligible
  • For now, the scheme will be offered till 31st March, 2018 only
  • Aadhar number is mandatory to apply for loan under the scheme
  • This scheme is not available for purchase of a rural property
  • If you are a married couple, your combined annual income must be less than 18 Lakhs
  • You can invest in any property you like, as long as the dimensions are within 120Sq Mtr (~1292 Sq Ft) – 150 Sq Mtrs (~1614 Sq Ft)If you take the benefit of interest subsidy. This has been revised 160 Sq Mtr (~1722 Sq Ft) – 200 Sq Mtr (~2153 Sq Ft) in June 2018
  • You will not be able to switch your home loan at any time during your loan. So you should choose a bank wisely. You should choose a bank that is known for:
    • Good service
    • Competitive interest rates
    • Suitable network of branches
    • Scale of operations

Many leading banks and housing finance companies have empanelled with NHB and HUDCO already. You may find some of these suitable – State Bank of India (SBI), Axis Bank, ICICI Bank, DHFL There is no doubt about how useful this scheme is for the middle-income group. Along with the subsidy, you would also get rebate on income tax. In the past, social schemes have failed miserably in the face of multiple levels of governance and channels. However, now with Aadhar, PAN and bank accounts being made mandatory, there should be no time or money lost in the process. If you are yet to build or buy your own home, this is a good time to take that step. So, go ahead and call your home loan advisor today! You can also sit back and let a Switchme advisor help you through the process. Click here to get a call now  

 


Suma Ganesh

Suma Ganesh

Suma is an MBA in Finance and Marketing from ICFAI, Bangalore. She worked as an investment advisor to retail and high networth clients for nearly 7 years at Allegro Capital Advisors Pvt Ltd. This gave her a first hand understanding of the needs of an individual customer. With this edge, she moved on to Adi FinShiksha Pvt Ltd, where she trained financial advisors to manage their clients' investments and financial needs. With deep understanding of customers and their advisors, Suma then moved on to writing content in the space of personal finance. she is currently working as part of the content creation team at SwitchME, addressing the needs of home buyers and home loan borrowers.
14 COMMENTS

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  1. vinay joshi
    Oct 08 2018 at 2:10 am
    Reply

    Two questions.
    1. My loan was sanctioned last week and I have not applied for subsidy . Can I still do it now.
    2. I had taken a home loan in my name few years back for a house in my father’s name. The house is in my father’s name. Can I still apply for subsidy in the second loan?

    • Suma Ganesh
      Suma Ganesh
      Oct 12 2018 at 12:37 pm

      Hi Vinay,
      Thank you for writing in to us.
      1. If you are not an owner in the first property, how did you get the loan?
      2. When a bank looks at your CIBIL report for a new home loan, they will see that you have been paying a home loan already. So the bank would consider this your second property. Hence, you will not be eligible for PMAY benefit.

  2. Deepak Sawant
    Oct 01 2018 at 2:59 pm
    Reply

    If there is an unauthorized house and if a legal home is taken then will it not get subsidy?

    • Suma Ganesh
      Suma Ganesh
      Oct 03 2018 at 1:51 pm

      Hi Deepak,
      Thank you for writing in to us.
      If the construction is unauthorised or illegal, you may not have all documents that a bank requires.
      So you may not get a home loan and hence no subsidy from PMAY

  3. sekhar
    Sep 23 2018 at 6:58 am
    Reply

    I have applied for housing loan of Rs 45 lacs with built up area of 2300 sq ft.I fall under MIG-II with income of Rs 14 lacs. am i eligible for subsidy

    • Suma Ganesh
      Suma Ganesh
      Sep 28 2018 at 1:51 pm

      Hi Sekhar,
      Thank you for writing in to us.
      Your carpet area will be less than built up area. If carpet area of your house is less than 2153 sq feet, you should be eligible for benefit under the PMAY scheme. Please read all the other criteria and make sure you qualify.

  4. Oliver
    Sep 01 2018 at 7:22 pm
    Reply

    I have two questions If one’s salary is 17 Lakhs + Variable pay (which varies year to year b/w 50K to 1.5L) – would they qualify? 2) what is the loan tenure is only for 15 years, does it qualify?

    • Suma Ganesh
      Suma Ganesh
      Sep 28 2018 at 2:55 pm

      Hi Oliver,

      Thank you for writing in to us.
      1. Your annual income (including variable pay) will be considered
      2. Loan tenure of 15 years is fine

  5. mahesh
    May 04 2018 at 4:40 pm
    Reply

    How much time it will take to credit subsidy amount in my account when i got loan sanction on Nov 2017

    • Suma Ganesh
      Suma Ganesh
      May 09 2018 at 7:38 pm

      Hi Mahesh,

      Thank you for writing to us.
      You should have received the subsidy by now.
      Please meet your bank and find out the status

  6. Vikas saini
    Apr 15 2018 at 9:13 am
    Reply

    i have taken home loan of 11 lakh from LIC housing in December 2016for my first houses…. can I Stella apply for subsidy.

    • Suma Ganesh
      Suma Ganesh
      May 11 2018 at 12:29 pm

      Hi Vikas,
      Thank you for writing in to us.
      Loans sanctioned and applications in process since 1st January 2017 are eligible for the scheme.

  7. Arun
    Nov 23 2017 at 7:20 am
    Reply

    I have taken home loan of 10 lakh from pnb in August 2016 for my 1st house.. Can I still apply for subsidy.

    • Suma Ganesh
      Suma Ganesh
      Nov 28 2017 at 9:56 am

      Hi Arun,
      Thank you for writing in to us.
      You will not be able to apply for subsidy under PMAY