How to Avail Home Loans Under PMAY for Interest Subsidy

Government schemes like Pradhan Mantri Awas Yojana (PMAY) - Credit Linked Subsidy Scheme (CLSS), has made affordable housing a reality. Whether you belong to the Economically Weaker Section (EWS), Low Income Group (LIG), or Middle Income Group (MIG I and II), PMAY offers subsidies on interest rates for home loans, making housing more affordable.

In this guide, we will explain how you can avail PMAY subsidy - interest subsidy on home loans. From understanding eligibility criteria to claiming your subsidy, we will provide you with all the information you need to make informed decisions to avail interest subsidy on home loan.

What is PMAY?

PMAY - full form Pradhan Mantri Awas Yojana - was launched in 2015 by the Government of India with the sole intention of making housing affordable for all. There are two components of PMAY - PMAY (Gramin) and PMAY (Urban). 

PMAY (Gramin) is an initiative to provide pucca house to all those living in kutcha houses in rural areas. 

PMAY (Urban) is an initiative to provide affordable housing for the economically weaker section (EWS), middle income group (MIG I and II) and low income group (LIG). People falling under this group are eligible for home loan interest subsidy. The home loan subsidy is given under CLSS or Credit Linked Subsidy Scheme. 

Eligibility Criteria for CLSS under PMAY

To be eligible for the PMAY home loan subsidy, you need to meet specific criteria:

• The property you plan to purchase/construct should be in a city or town, as notified by the Ministry of Housing and Urban Affairs.
• Neither you nor your family members should own a pucca house anywhere in India.
• You or any of your family members should not have availed assistance under any central government schemes from the Government of India or any component of PMAY before.
• A female's name should be there on the property paper as owner or co-owner of the house.
• The applicant must belong to the listed areas, villages, towns and cities as per census 2011.

It's important to note that to apply for PMAY, adult earning members, regardless of marital status, are considered separate households.

Benefits of CLSS under PMAY

The CLSS offers a subsidy on the interest payable on your home loan, subject to certain conditions. The benefits vary depending on which category you belong to:

1. MIG I (Middle Income Group I)

   If your annual household income is above ₹6 lakhs but below ₹12 lakhs and the carpet area of the house you are purchasing/constructing is within 160 sq. meters, you can avail a subsidy of up to 4% on the interest rate for a maximum loan amount of ₹9 lakh.

    

2. MIG II (Middle Income Group II)

   If your annual household income is above ₹12 lakhs but below ₹18 lakhs and the carpet area of the house is within 200 sq. meters, you can avail a subsidy of up to 3% on the interest rate for a maximum loan amount of ₹12 lakh.

    

3. LIG and EWS (Low Income Group and Economically Weaker Section)

   If your annual household income is above ₹3 lakhs but below ₹6 lakhs and the carpet area of the house is within 60 sq. meters, you can avail a subsidy of up to 6.5% on the interest rate for a maximum loan amount of ₹6 lakhs. In a nutshell, it is shown in the below table:

It's important to note that the interest subsidy is available for a home loan tenure of up to 20 years.

How CLSS Works?

To understand how CLSS works, let's take an example: Suppose you have taken a home loan of ₹9 lakh for 20 years at an interest rate of 9%. As per the MIG I category, with an interest subsidy of 4%, your effective interest rate will be reduced to 5%. This means that throughout your loan tenure, you will receive a total subsidy of ₹2,35,068.

While you can borrow a higher amount based on your eligibility, the maximum loan amount eligible for interest subsidy under CLSS is ₹9 lakh for the MIG I category. Similarly, the subsidy is applicable for a maximum tenure of 20 years. The subsidy will be capped accordingly if you opt for a longer tenure or a higher loan amount.

How to Claim Home Loan Subsidy under PMAY?

To claim the subsidy under PMAY home loan, your home loan should have been approved on or after January 1, 2017. The government scheme is valid until March 31, 2022, for EWS/LIG segments and March 31, 2021 for MIG segments. You don't need to claim the subsidy personally; your home loan provider will take care of it. 

All you need to do is file a declaration confirming that you meet the eligibility criteria. The lending institution will then claim and complete all necessary formalities on your behalf. Once the nodal agency, such as the National Housing Bank, approves the subsidy, it will be credited to your home loan account upfront.

To make affordable housing a reality through a PMAY home loan, it's essential to ensure you are aware of all the requirements and take advantage of the available subsidies.