The Indian Government’s flagship program, Pradhan Mantri Awas Yojana, widely known as PMAY, was launched in June 2015 with the aim to fuel the concept of “Housing for All”. The scheme works towards making life better for homeless people in India. The main proposal of the scheme is to construct two crore homes for people belonging to low-income families, middle-income groups and economically weaker sections. So far, the government has sanctioned 1.12 crores homes.
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Here’s all you need to know about the PMAY scheme and how to avail home subsidy under it.
Purpose Behind PMAY Scheme
Over the last decade in India, there has been a continuous surge in property and land prices. It is especially true for individuals residing in metropolitan cities as they have seen a 38% jump in the overall property prices. There has been a significant reduction in affordability and therefore to encourage sustainable and affordable housing for the urban poor, the scheme was introduced.
The initiative aims at building more houses by using eco-friendly materials for construction. The aim behind this is to ensure minimum damage to the environment and will cause less air and sound pollution. Through various measures and incentives, it seeks to address the housing requirements of the urban poor people including slum dwellers such as promotion of affordable housing for weaker sections through credit linked subsidy, slum rehabilitation with the participation of private developers using land as a resource, etc.
4 Components of PMAY Scheme
PMAY- Urban or PMAY-U consists of three schemes where the loan interest subsidy is available for individuals belonging to Economically Weaker Sections (EWS), Lower Income Group (LIG) or Middle Income Group (MIG). Here’s what they mean.
“In-situ” Slum Redevelopment (ISSR) using Land as Resource
This is the most important component of the “Pradhan Mantri Awas Yojana (Urban) – Housing for All” mission. The approach aims to redevelop slums by using land as a resource with the participation of the private sector. The mission aims to leverage the locked potential of land under slum areas and make houses on it for eligible slum dwellers bringing them into the formal urban settlement.
As per the guidelines, the highlights of the approach is to provide grants of INR 1 lakh per house on average for all houses built for eligible slum dwellers. Also, state governments decide how the houses constructed will be allocated: based on ownership rights or renewable, mortgageable and inherited leasehold rights.
Affordable Housing through Credit-Linked Subsidy
CLSS is the most important benefit of the PMAY scheme. This enables beneficiaries of the Economically weaker section (EWS), Low-Income group (LIG), Middle-income group (MIG-1) and (MIG-2) to receive home loans for construction or acquisitions at much lower interest rates. The scheme beneficiaries are eligible for interest subsidy if they want a loan to buy or construct a new house or even want to add rooms, kitchen or washrooms to existing dwellings as incremental housing.
Under this scheme, the government will provide an interest subsidy of 6.5%, 4% and 3% on loan amounts of 6 lakh, INR 9 lakh and INR 12 lakh respectively.
The mentioned members of a certain group can receive a substantial increase in interest payment. For instance, if the member of the above group applies for a home loan, he/she would be charged an interest rate of 7% to 8% as per today’s interest rate.
For a home loan up to INR 6 lakh, he/she will receive an interest subsidy as per the eligibility. The lending institutions directly pay the interest subsidy to the beneficiaries account which will reduce the housing loan amount leading to lower EMIs. However, if the loan amount is over INR 6 lakh then the borrower will have to pay the regular interest rate on the amount exceeding over INR 6 lakh.
To monitor the progress and to channelize the subsidy to the beneficiaries through lending institutions, the ministry has designated the National Housing Bank (NHB), Housing and Urban Development Corporation (HUDCO) and State Bank of India (SBI).
Affordable Housing in Partnership (AHP)
The government has also approved the scheme of affordable housing in partnership with the private and public sectors. As a part of the preventive strategy, the scheme aims to provide affordable housing to the economically weaker sections. Preference in allotment may be given to people with physical disabilities, senior citizens, SCs and STs and other backward vulnerable sections of the society. Projects under AHP to have a minimum of 250 houses with at least 35% houses of EWS category.
Subsidiary for Beneficiary-led Construction or Enhancement
This component assists families of the EWS category to enhance their existing houses or construct new ones. It focuses on providing financial assistance to EWS houses being built in various partnership models by States or Union Territories. Each EWS house is provided with central assistance of INR 1.5 lakh.
Along with all these components, a new component was added post Covid. On 14th June 2020 the Union cabinet understood the need for affordable rental housing schemes – basically a sub-scheme under PMAY (U). The mission behind the same was to help urban poor migrants with secure and decent rental housing at affordable rates which will be close to their workplaces catering to safeguard their employment opportunities.
Eligibility to Apply for PMAY Scheme
Before applying for the scheme, it is important to know whether you are eligible to receive subsidies under this scheme. There are three parameters such as your income, your economic strata and housing needs on which the eligibility is decided. So, those who already own a home or any of their family members own home are kept out of the benefits of PMAY. Below are the following factors which will help you understand your eligibility to apply for the subsidy.
The scheme is aimed at providing housing for all. Therefore, beneficiaries who have already availed of the benefit under Pradhan Mantri Awas yojana are kept out of the benefits of PMAY. To avoid duplication the beneficiary and the family members have to provide their Aadhaar numbers while applying for the loan.
- The maximum age limit is 70-years of age, at the end of the repayment period.
The income plays a bigger role here as households with the family’s total income of INR 18 lakh per year or more would be ineligible to avail benefits under the Pradhan Mantri Awas Yojana.
For the EWS category, the annual income should be up to INR 3 lakh whereas for the LIG category the annual income should be between INR 3 lakh to INR 6 lakh.
Households with an annual income between INR 6 lakh and INR 12 lakh fall under MIG I while households with an annual income between INR 12 lakh and INR 18 lakh fall under the MIG II category.
- To avail of the subsidy, the borrower is required to submit a self-declaration to the lender where all details will be mentioned with proof such as his income and title of the property to be acquired.
- A home loan is taken for renovation or extension of an already existing property, the work must be completed within 36 months from receiving the first loan instalment.
- This scheme has benefitted more women than men. Just like men, the government offers a subsidy of up to INR 2.67 lakh to the women applicant. However, the condition is that a woman’s name should be on the property papers. Women can either be the sole owner or be in joint ownership.
The government has kept all the women in mind and also included widows, single women, disabled women and women of the SC-ST category in this scheme. These women are given high priority by providing cheap and affordable housing. As a result, all men will value the women of their houses and make them equal partners of the investment under PMAY.
No beforehand central assistance should have been availed by the beneficiary family from any housing scheme from the Indian Government or any Pradhan Mantri Awas Yojana scheme.
As per the census 2011, the house or property of purchase must belong to one of areas, towns, villages or cities.
As per the last budget, the subsidy was stopped for MIG till 2021 whereas the subsidy of LIG and EWS category will continue till March 31, 2022.
Process to Avail Subsidy Under the PMAY Scheme
To promote the sale and purchase of affordable units, the government provides subsidy benefits up to a certain price bracket. In Budget 2019, affordable properties got limited as well. Under this, size was maintained at up to 60 sq mt in metro cities and 90 sq mt in non-metros. Also, INR 45 lakh price bracket is considered affordable housing under the PMAY.
As per the above criteria, if you are eligible to avail of the scheme, there are both offline and online modes to do it. There are two ways to apply for the subsidy that is applying through CSC- Common Services centers that are available for delivering government services. The other option is to directly apply through the official online portal of PMAY. You can get a home loan subsidy under the PMAY scheme through the following steps:
Check your Income threshold: Once you are applying for the PMAY subsidy on your home loan, it is important to check on which category you fall under (EWS, LIG or MIG). Depending on the same apply for the carpet area for your residential property.
To check how much you will be saving on the total home loan, you can make use of an online EMI calculator. This will help you understand your liability as a borrower and the monthly EMIs based on the agreed rate of interest. For example – in case the borrower INR 15 lakh, the amount of subsidy will be restricted to INR 6 lakh and the additional loan of INR 9 lakh shall be charged at regular interest rates.
Visit the Official Website: When you are clear about the category you fall under, visit the official website to apply for the same. Find the “Citizen Assessment” option from the header menu section.
Proceed with loan application – Fill out the application form by submitting all the details such as your income proof, investment details, property details, co-applicants details etc. To avail of the Pradhan Mantri Awas Yojana, the following documents are required:
Age Proof documents – a copy of your Passport/Driving License/Policy/Birth Certificate/PAN Card/School Leaving Certificate
Affidavit cum Declaration that proves that the beneficiary family does not own any pucca house
Declaration for property under construction, if applicable – Construction Agreement with the developer or builder, Receipt of advance payment for the property you intend to purchase
Copy of Address Proof – Bank Statements/Property Registration documents/Property Tax Receipt/Voter ID
Salary Proof Documents (for each earning member of the household) – copy of Salary slips for the last three months/Appointment Letter/Yearly Increment Letter/Certified true copy of Form 16
Existing loan details – to be provided through bank statements
Processing Fee Cheque – To be issued from the salary account for salaried customers or the business account for self-employed customers
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Once completed with the application, you will be landing on the application form where you can download the required details and print the page. Submit the form at your nearest CSC office centres and financial institutions/banks along with the required documents.